<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1997
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. 38 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 41 [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)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant
pursuant to paragraph (b) to paragraph (a)(1)
[X] on August 1, 1997 [ ] 75 days after filing
pursuant to paragraph (b) pursuant to paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant
pursuant to paragraph (a)(1) to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
California Limited Maturity Municipals Portfolio, Connecticut Limited
Maturity Municipals Portfolio, Florida Limited Maturity Municipals Portfolio,
Massachusetts Limited Maturity Municipals Portfolio, Michigan Limited Maturity
Municipals Portfolio, National Limited Maturity Municipals Portfolio, New
Jersey Limited Maturity Municipals Portfolio, New York Limited Maturity
Municipals Portfolio, Ohio Limited Maturity Municipals Portfolio and
Pennsylvania Limited Maturity Municipals Portfolio have each also executed
this Registration Statement.
CALCULATION OF REGISTRATION FEE
===============================================================================
PROPOSED PROPOSED
AMOUNT OF MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE MAXIMUM REGISTRATION
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------
Shares of Beneficial
Interest 19,751,966 $10.24(1) $202,260,128(2) $0
===============================================================================
(1) Computed under Rule 457(d) on the basis of the maximum aggregate offering
price per share at the close of business on July 14, 1997.
(2) Registrant elects to calculate the maximum aggregate offering price
pursuant to Rule 24e-2 for those series with a fiscal year end of March
31, 1997. $240,999,471 of shares were redeemed during the fiscal year
ended March 31, 1997. $38,739,343 of shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during such fiscal year.
$202,260,128 of shares redeemed are being used for the reduction of the
registration fee in this Amendment.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
27, 1997 filed its "Notice" as required by that Rule for the fiscal year ended
March 31, 1997. Registrant continues its election to register an indefinite
number of shares of beneficial interest pursuant to rule 24f-2.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under Securities Act of 1933
Part A--The Combined Prospectuses of:
EV Classic State Limited Maturity Municipal Funds:
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
EV Marathon State Limited Maturity Municipal Funds:
EV Marathon California Limited Maturity Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
EV Traditional State Limited Maturity Municipal Funds:
EV Traditional California Limited Maturity Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
The Prospectuses of:
EV Classic National Limited Maturity Municipals Fund
EV Marathon National Limited Maturity Municipals Fund
EV Traditional National Limited Maturity Municipals Fund
Part B--The Combined Statements of Additional Information of:
EV Classic State Limited Maturity Municipal Funds:
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
EV Marathon State Limited Maturity Muncipal Funds:
EV Marathon California Limited Maturity Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
EV Traditional State Limited Maturity Municipal Funds:
EV Traditional California Limited Maturity Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
The Statements of Additional Information of:
EV Classic National Limited Maturity Municipals Fund
EV Marathon National Limited Maturity Municipals Fund
EV Traditional National Limited Maturity Municipals Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
<PAGE>
EATON VANCE INVESTMENT TRUST
CROSS REFERENCE SHEET FOR
EV STATE LIMITED MATURITY MUNICIPAL FUNDS
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
1. ..................... Cover Page Cover Page
2. ..................... Synopsis Shareholder and Fund Expenses
3. ..................... Condensed Financial Information The Funds' Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Funds' Investment Objective; Investment
Policies and Risks; Organization of the
Funds and the Portfolios
5. ..................... Management of the Fund Management of the Funds and the Portfolios
5A...................... Management's Discussion of Fund
Performance Not Applicable
6. ..................... Capital Stock and Other Securities Organization of the Funds and the Portfolios;
Reports to Shareholders; The Lifetime
Investing Account/Distribution Options;
Distributions and Taxes
7. ..................... Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
The Lifetime Investing Account/Distribution
Options; Distribution Plans (for Classic
and Marathon Funds); Service Plans (for
Traditional Funds); The Eaton Vance
Exchange Privilege; Eaton Vance Shareholder
Services
8. ..................... Redemption or Repurchase How to Redeem Fund Shares
9. ..................... Pending Legal Proceedings Not Applicable
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan (for Classic and Marathon
Funds); Service Plan (for Traditional
Fund); Custodian; Independent Certified
Public Accountants; Fees and Expenses
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions; Fees and
Practices Expenses
18. ..................... Capital Stock and Other Securities Other Information
19. ..................... Purchase, Redemption and Pricing of Determination of Net Asset Value; Principal
Securities Being Offered Underwriter; Service for Withdrawal;
Services for Accumulation (for Traditional
Funds); Distribution Plan (for Classic and
Marathon Funds); Service Plan (for
Traditional Funds); Fees and Expenses
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter; Fees and Expenses
22. ..................... Calculation of Performance Data Investment Performance; Performance
Information
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
EATON VANCE INVESTMENT TRUST
CROSS REFERENCE SHEET FOR
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NATIONAL LIMITED MATURITY MUNICIPALS FUND
ITEMS REQUIRED BY FORM N-1A
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- ---------------------------------------------
<S> <C> <C>
1. ..................... Cover Page Cover Page
2. ..................... Synopsis Shareholder and Fund Expenses
3. ..................... Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. ..................... General Description of Registrant The Fund's Investment Objective; Investment
Policies and Risks; Organization of the
Fund and the Portfolio
5. ..................... Management of the Fund Management of the Fund and the Portfolio
5A...................... Management's Discussion of Fund
Performance Not Applicable
6. ..................... Capital Stock and Other Securities Organization of the Fund and the Portfolio;
Reports to Shareholders; The Lifetime
Investing Account/Distribution Options;
Distributions and Taxes
7. ..................... Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
The Lifetime Investing Account/Distribution
Options; Distribution Plan (for Classic and
Marathon Funds); Service Plan (for
Traditional Fund); The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder Services
8. ..................... Redemption or Repurchase How to Redeem Fund Shares
9. ..................... Pending Legal Proceedings Not Applicable
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ---------------------------------------------
10. ..................... Cover Page Cover Page
11. ..................... Table of Contents Table of Contents
12. ..................... General Information and History Other Information
13. ..................... Investment Objectives and Policies Additional Information about Investment
Policies; Investment Restrictions
14. ..................... Management of the Fund Trustees and Officers; Fees and Expenses
15. ..................... Control Persons and Principal Holders of Control Persons and Principal Holders of
Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan (for Classic and Marathon
Funds); Service Plan (for Traditional
Fund); Custodian; Independent Certified
Public Accountants; Fees and Expenses
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions; Fees and
Practices Expenses
18. ..................... Capital Stock and Other Securities Other Information
19. ..................... Purchase, Redemption and Pricing of Determination of Net Asset Value; Principal
Securities Being Offered Underwriter; Service for Withdrawal;
Services for Accumulation (for Traditional
Fund); Distribution Plan (for Classic and
Marathon Funds); Service Plan (for
Traditional Fund); Fees and Expenses
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter; Fees and Expenses
22. ..................... Calculation of Performance Data Investment Performance; Performance
Information
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NATIONAL LIMITED MATURITY MUNICIPALS FUND
SUPPLEMENT TO PROSPECTUSES DATED AUGUST 1, 1997
1. Until September 1, 1997, under the table "Shareholder and Fund Expenses" the
Maximum Sales Charge Imposed on Purchases is 2.50%. As a result, in the EXAMPLE
section of the table the expenses paid by a shareholder would be slightly
higher.
2. Until September 1, 1997, the sales charge table in effect under "How to Buy
Fund Shares" is replaced (except for the footnotes) with the following:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 .......................... 2.50% 2.56% 2.75%
$50,000 but less than $100,000 ............. 2.25 2.30 2.50
$100,000 but less than $250,000 ............ 1.75 1.78 2.00
$250,000 but less than $500,000 ............ 1.25 1.27 1.50
$500,000 but less than $1,000,000 .......... 1.00 1.01 1.00
$1,000,000 or more ......................... 0.00* 0.00* 0.50
</TABLE>
3. Each Fund (and its corresponding Portfolio) has an investment policy of
investing at least 80% of its net assets in obligations rated at least
investment grade.
August 1, 1997 23LTD8/31PS
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
LIMITED MATURITY MUNICIPAL FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS
FUND
</TABLE>
THE EV CLASSIC LIMITED MATURITY MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL FUNDS
SEEKING TO PROVIDE (1) 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 AND (2) LIMITED PRINCIPAL FLUCTUATION.
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 INVESTING DIRECTLY IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. 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 August 1, 1997 for the Funds,
as supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by reference.
This Statement of Additional Information is available without charge from the
Funds' principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolios' investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and
Eaton Vance Management is the administrator (the "Administrator") of the Funds.
The offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PAGE
Shareholder and Fund Expenses ....................................... 2
The Funds' Financial Highlights ..................................... 3
The Funds' Investment Objectives .................................... 5
Investment Policies and Risks ....................................... 5
Organization of the Funds and the Portfolios ........................ 9
Management of the Funds and the Portfolios .......................... 10
Distribution Plans .................................................. 11
Valuing Fund Shares ................................................. 12
How to Buy Fund Shares .............................................. 12
How to Redeem Fund Shares ........................................... 13
Reports to Shareholders ............................................. 15
The Lifetime Investing Account/Distribution Options ................. 15
The Eaton Vance Exchange Privilege .................................. 16
Eaton Vance Shareholder Services .................................... 16
Distributions and Taxes ............................................. 17
Performance Information ............................................. 18
Appendix -- State Specific Information .............................. 19
- --------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemptions During the First Year
(as a percentage of redemption proceeds exclusive of all reinvestments and
capital appreciation in the account) 1.00%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- -----------------------------------------------------------------------------------------------------------------
FLORIDA MASSACHUSETTS NEW YORK PENNSYLVANIA
FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Adviser Fee 0.46% 0.47% 0.46% 0.47%
Rule 12b-1 Distribution (and Service) Fees 0.90 0.90 0.90 0.90
Other Expenses (after expense allocations) 0.34 0.30 0.32 0.44
---- ---- ---- ----
Total Operating Expenses (after reduction) 1.70% 1.67% 1.68% 1.81%
==== ==== ==== ====
EXAMPLES
- -----------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses (including a contingent deferred sales charge in the case of redemption
during the first year after purchase) on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at the
end of each period:
<CAPTION>
FLORIDA MASSACHUSETTS NEW YORK PENNSYLVANIA
FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 27 $ 27 $ 27 $ 28
3 Years 54 53 53 57
5 Years 92 91 91 98
10 Years 201 198 199 213
</TABLE>
NOTES:
The table and Examples summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in a Fund. Information for
each Fund is based on such Fund's expenses for the most recent fiscal year.
Absent an expense allocation, Other Expenses and Total Operating Expenses would
have been 0.44% and 1.80%, respectively, for the Florida Fund; 0.59% and 1.96%,
respectively, for the Massachusetts Fund; 0.68% and 2.04%, respectively, for the
New York Fund; and 0.56% and 1.93%, respectively, for the Pennsylvania Fund.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Examples to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of both the Funds and the
Portfolios, see "The Funds" Financial Highlights," "Management of the Funds and
the Portfolios" and "How to Redeem Fund Shares." A long-term shareholder in a
Fund may pay more than the economic equivalent of the maximum front-end sales
charge permitted by a rule of the National Assocation of Securities Dealers,
Inc. See "Distribution Plans."
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
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
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege." In the Example above, expenses would be $10 less in the
first year if there was no redemption. 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 10.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees are investing in the
Portfolios and others 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 audited
financial statements that appear in the Funds' annual report to shareholders.
The Funds' financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of a Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLORIDA FUND MASSACHUSETTS FUND
-------------------------------------------- ------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
-------------------------------------------- ------------------------------------------------
1997 1996 1995 1994++ 1997 1996 1995 1994++
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $9.620 $ 9.520 $ 9.480 $10.000 $ 9.680 $ 9.560 $ 9.520 $10.000
INCOME (LOSS) FROM OPERATIONS:
Net investment income $0.364 $ 0.359 $ 0.353 $ 0.103 $ 0.376 $ 0.370 $ 0.359 $ 0.107
Net realized and unrealized
gain (loss) on investments (0.187) 0.100 0.088 (0.495) (0.119) 0.118 0.092 (0.451)
------- ------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $0.177 $ 0.459 $ 0.441 $(0.392) $ 0.257 $ 0.488 $ 0.451 $(0.344)
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.357) $(0.359) $(0.353) $(0.103) $(0.367) $(0.368) $(0.359) $(0.107)
In excess of net investment
income(4) -- -- (0.048) (0.025) -- -- (0.052) (0.029)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.357) $(0.359) $(0.401) $(0.128) $(0.367) $(0.368) $(0.411) $(0.136)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.440 $ 9.620 $ 9.520 $ 9.480 $ 9.570 $ 9.680 $ 9.560 $ 9.520
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(1) 1.88% 4.84% 4.81% (4.07%) 2.70% 5.16% 4.90% (3.67%)
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $5,787 $8,299 $13,771 $22,535 $ 4,615 $ 5,053 $ 5,378 $ 4,967
Ratio of net expenses to
average daily net assets(2)(3) 1.70% 1.58% 1.50% 1.39%+ 1.67% 1.47% 1.63% 1.49%+
Ratio of net expenses to average
daily net assets, after
custodian fee reduction(2) 1.68% 1.56% -- -- 1.65% 1.46% -- --
Ratio of net investment
income to average daily
net assets 3.80% 3.75% 3.81% 3.25%+ 3.90% 3.80% 3.82% 3.12%+
*For the following periods, the operating expenses of the Funds and the Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been as follows:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(3) 1.80% 1.78% 1.71% 1.65%+ 1.96% 1.92% 2.00% 2.38%+
Expenses after custodian fee
reduction(2) 1.78% 1.76% -- -- 1.94% 1.91% -- --
Net investment income 3.70% 3.55% 3.60% 2.99%+ 3.61% 3.35% 3.45% 2.23%+
NET INVESTMENT INCOME PER SHARE $ 0.354 $ 0.340 $ 0.334 $ 0.095 $ 0.348 $ 0.326 $ 0.324 $ 0.077
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(See footnotes on page 4.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK FUND PENNSYLVANIA FUND
------------------------------------------------------ ------------------------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------------------------------------ ------------------------------------------------------
1997 1996 1995 1994++ 1997 1996 1995 1994++
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 9.620 $ 9.490 $ 9.500 $ 10.000 $ 9.660 $ 9.550 $ 9.520 $10.000
-------- -------- -------- --------- -------- -------- -------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment
income $ 0.362 $ 0.359 $ 0.354 $ 0.100 $ 0.377 $ 0.373 $ 0.359 $ 0.103
Net realized and
unrealized
gain (loss) on
investments (0.094) 0.130 0.037+++ (0.473) (0.100) 0.105+++ 0.082 (0.453)
-------- -------- -------- --------- -------- -------- -------- -------
Total income
(loss) from
operations $ 0.268 $ 0.489 $ 0.391 $ (0.373) $ 0.277 $ 0.478 $ 0.441 $(0.350)
-------- -------- -------- --------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net
investment income $ (0.358) $ (0.359) $ (0.354) $ (0.100) $ (0.367) $ (0.368) $ (0.359) $(0.103)
In excess of net
investment income(4) -- -- (0.047) (0.027) -- -- (0.052) (0.027)
-------- -------- -------- --------- -------- -------- -------- -------
Total
distributions $ (0.358) $ (0.359) $(0.401) $ (0.127) $ (0.367) $ (0.368) $ (0.411) $(0.130)
-------- -------- -------- --------- -------- -------- -------- -------
NET ASSET VALUE,
end of year $ 9.530 $ 9.620 $ 9.490 $ 9.500 $ 9.570 $ 9.660 $ 9.550 $ 9.520
======== ======== ======== ========= ======== ======== ======== =======
TOTAL RETURN(1) 2.84% 5.19% 4.26% (3.88%) 2.93% 5.05% 4.79% (3.65%)
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end
of year
(000 omitted) $ 2,987 $ 4,064 $ 6,043 $ 6,325 $ 5,684 $ 7,481 $ 9,753 $14,022
-------- -------- -------- --------- -------- -------- -------- -------
Ratio of net
expenses to
average daily
net assets(2)(3) 1.68% 1.48% 1.52% 1.61%+ 1.81% 1.53% 1.47% 1.38%+
Ratio of net
expenses to
average daily
net assets,
after custodian
fee reduction(2) 1.66% 1.46% -- -- 1.79% 1.51% -- --
Ratio of net
investment
income to
average daily
net assets 3.77% 3.75% 3.76% 3.17%+ 3.92% 3.87% 3.83% 3.29%+
*For the following periods, the operating expenses of the Funds and the Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been as follows:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(3) 2.04% 1.90% 1.90% 2.17%+ 1.93% 1.85% 1.84% 1.82%+
Expenses after
custodian fee
reduction(2) 2.02% 1.88% -- -- 1.91% 1.83% -- --
Net investment
income 3.41% 3.33% 3.38% 2.61%+ 3.80% 3.55% 3.46% 2.85%+
NET INVESTMENT
INCOME PER SHARE $ 0.327 $ 0.319 $ 0.318 $ 0.082 $ 0.365 $ 0.342 $ 0.324 $ 0.089
======== ======== ======== ======== ======== ======== ======== =======
+ Computed on an annualized basis.
++ For the period from the start of the Fund's business to the fiscal year end on March 31st. The start of business for each
Fund is as follows: December 8, 1993 for the Florida, New York and Pennsylvania Funds; and December 9, 1993 for the
Massachusetts Fund.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the timing
of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at such time.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on the
payable date. Total return is computed on a non-annualized basis.
(2) Includes each Fund's share of its corresponding Portfolio's allocated expenses.
(3) The expense ratios for the years ended March 31, 1996 and thereafter have been adjusted to refect a change in reporting
requirements. The new reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset
arrangements with its service providers or those of the Portfolio. The expense ratios for each of the prior periods have not
been adjusted to reflect this change.
(4) The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax earnings and profits that result in
temporary over-distributions for financial statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- -------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which has
the same investment objective and policies as its corresponding Fund. Each
Portfolio 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 at least investment grade quality by the Investment Adviser.
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND (the "Florida Fund") seeks
to provide (1) a high level of current income exempt from regular federal income
tax in the form of an investment exempt from Florida intangibles tax, and (2)
limited principal fluctuation. The Florida Fund seeks to meet its objective by
investing its assets in the Florida Limited Maturity Municipals Portfolio (the
"Florida Portfolio").
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND (the "Massachusetts
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Massachusetts State personal income taxes, and (2)
limited principal fluctuation. The Massachusetts Fund seeks to meet its
objective by investing its assets in the Massachusetts Limited Maturity
Municipals Portfolio (the "Massachusetts Portfolio").
EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND (the "New York Fund") seeks
to provide (1) a high level of current income exempt from regular federal income
tax and New York State and New York City personal income taxes, and (2) limited
principal fluctuation. The New York Fund seeks to meet its objective by
investing its assets in the New York Limited Maturity Municipals Portfolio (the
"New York Portfolio").
EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND (the "Pennsylvania
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Pennsylvania State and local taxes in the form of an
investment exempt from Pennsylvania personal property taxes, and (2) limited
principal fluctuation. The Pennsylvania Fund seeks to meet its objective by
investing its assets in the Pennsylvania Limited Maturity Municipals Portfolio
(the "Pennsylvania Portfolio").
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES THAT, IN ACCORDANCE WITH ITS
INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy is a
fundamental policy of each Fund and its corresponding Portfolio and may not be
changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be.
At least 75% of each Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested in municipal obligations rated below investment grade
(but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below Baa or BBB are commonly
known as "junk bonds." A Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
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, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature and the availability of monies
for such payments. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% of its total assets in
obligations issued by its respective State or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
March 31, 1997, the Portfolios had invested in private activity bonds as follows
(as a percentage of net assets): Florida Portfolio (4.5%); Massachusetts
Portfolio (12.3%); New York Portfolio (17.3%); and Pennsylvania Portfolio
(9.6%). Distributions to corporate investors of certain interest income may also
be subject to the AMT. The Funds may not be suitable for investors subject to
the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely affected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by a
State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased risk
of loss. Each Portfolio may also invest in obligations issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix to this
Prospectus for a description of some of the economic and other factors relating
to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets in
municipal obligations of the same type, including, without limitation, the
following: lease rental obligations of State and local authorities; obligations
dependent on annual appropriations by a State's legislature for payments;
obligations of State and local housing finance authorities, municipal utilities
systems or public housing authorities; obligations of hospitals or life care
facilities; or industrial development or pollution control bonds issued for
electric utility systems, steel companies, paper companies or other purposes.
This may make a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5% (but
not more than 25%) of its total assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
FUTURES TRANSACTIONS. Each Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed a Portfolio's initial investment
in these contracts. A Portfolio may not purchase or sell futures contracts or
related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED OBLIGATIONS. Each Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce a Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of a Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower) or are unrated. As indicated above, each
Portfolio may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
Municipal obligations rated investment grade or below and comparable unrated
municipal obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When a Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by a Portfolio which are rated below investment grade
but which, subsequent to the assignment of such rating, are backed by escrow
accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. A Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by a Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, a Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares 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. 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 that of a fund with a longer average portfolio duration. Changes in
the credit quality of the issuers of municipal obligations held by a Portfolio
will affect the principal value of (and possibly the income earned on) such
obligations. In addition, the values of such securities are affected by changes
in general economic conditions and business conditions affecting the specific
industries of their issuers. Changes by recognized rating services in their
ratings of a security and in the ability of the issuer to make payments of
principal and interest may also affect the value of a Portfolio's investments.
The amount of information about the financial condition of an issuer of
municipal obligations may not be as extensive as that made available by
corporations whose securities are publicly traded. An investment in shares of a
Fund will not constitute a complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will invest in illiquid securities if more than 15% of
its net assets would be invested in securities that are not readily marketable.
No established resale market exists for certain of the municipal obligations in
which a Portfolio may invest. The market for obligations rated below investment
grade is also likely to be less liquid than the market for higher rated
obligations. As a result, a Portfolio may be unable to dispose of these
municipal obligations at times when it would otherwise wish to do so at the
prices at which they are valued.
Some of the securities in which a Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Each Portfolio is required to accrue income from zero- coupon bonds on
a current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF EACH FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series (such as the Funds). Each share represents an equal
proportionate beneficial interest in a Fund. 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." There are no annual meetings of
shareholders, but special meetings may be held as required by law to elect
Trustees and consider certain other matters. Shareholders are entitled to one
vote for each full share held. Fractional shares may be voted proportionately.
Shares have no preemptive or conversion rights and are freely transferable. In
the event of the liquidation of a Fund, shareholders of that Fund are entitled
to share pro rata in the net assets available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved restructuring
each Fund whereby each Fund will become the Class C shares of an Eaton Vance
[state name] Limited Maturity Municipals Fund. Other funds with the same
investment objective and policies that invest in the same Portfolio will become
Class A and Class B. It is anticipated that this restructuring will reduce Fund
operating expenses, thereby enhancing long-term returns and improving
operational flexibility. The conversion to the multiple-class structure will not
be a taxable transaction or change the value or cost basis of existing
shareholders' investments. Likewise, the conversion will not materially change
shareholder voting rights. It is possible that some shareholders could, in the
future, receive different distributions of realized capital gains that would be
the case if the restructuring did not occur. This result could occur because
allocation of each Portfolio's current unrealized capital gains will be
different under multiple-class accounting rules than has been the case under the
partnership accounting of the current structure. The actual realization of
capital gains in the future remains uncertain and depends not only on the
Investment Adviser's decisions but also on the fluctuating market valuation of
specific securities. Because capital gains distributions reduce the net asset
value of a fund's shares, the effect of such a distribution change is to alter
current tax obligations and tax obligations upon redemption (by the same
amount).
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, affords the potential for economies of scale for each Fund (at least
when the assets of its corresponding Portfolio exceed $500 million) and may over
time result in lower expenses for a Fund.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to its corresponding Fund, a Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in a Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the corresponding Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various 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. Information regarding other pooled investment entities or
funds which invest in a Portfolio may be obtained by contacting the Principal
Underwriter, 24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the corresponding Fund to withdraw
its investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets (or the
assets of another investor in the Portfolio) from its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund 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. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
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%
Each Portfolio paid advisory fees for the fiscal year ended March 31, 1997
equivalent to the percentage of average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO MARCH 31, 1997 ADVISORY FEE
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Florida $ 92,909,192 0.46%
Massachusetts 69,969,936 0.47%
New York 100,013,748 0.46%
Pennsylvania 67,875,607 0.47%
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Florida and
Massachusetts Portfolios since May 1, 1997. He has been a Vice President of
Eaton Vance and BMR since January, 1996 and an employee of Eaton Vance since
1989.
Nicole Anderes has acted as the portfolio manager of the New York Portfolio
since May 1, 1997. She joined Eaton Vance and BMR as a Vice President in
January, 1994. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994).
Timothy T. Browse has acted as the portfolio manager of the Pennsylvania
Portfolio since May 1, 1997. He has been a Vice President of Eaton Vance and BMR
since 1993 and an employee of Eaton Vance since 1992.
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. Each Fund, each Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by a Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing the Fund's assets in its corresponding Portfolio. As Administrator,
Eaton Vance provides the Funds with general office facilities and supervises the
overall administration of the Funds. For these services Eaton Vance currently
receives no compensation. The Trustees of the Trust may determine, in the
future, to compensate Eaton Vance for such services.
The Portfolios and the Funds, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLANS
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Each Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("1940 Act"). UNDER EACH FUND'S PLAN, THE
FUND PAYS THE PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN
ANNUAL RATE NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE
DISTRIBUTION OF FUND SHARES. Each Fund's Plan provides that the Fund may use
such fees to compensate the Principal Underwriter for sales commissions paid by
it to financial services firms ("Authorized Firms") on the sale of Fund shares
and for interest expenses. The Principal Underwriter currently expects to pay to
an Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Fund shares, the Principal Underwriter will retain the sales
commission as reimbursement for the sales commissions made to Authorized Firms
at the time of sale. Contingent deferred sales charges paid to the Principal
Underwriter will be used to reduce amounts owed to it. Because payments to the
Principal Underwriter by each Fund are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less the
above fees and contingent deferred sales charges received by it) may exist
indefinitely. During the fiscal year ended March 31, 1997, each Fund paid or
accrued fees under the Plan equivalent to .75% of such Fund's average daily net
assets. As of March 31, 1997, uncovered distribution charges amounted to
approximately $3,383,000 (equivalent to 58.5% of net assets on such day) in the
case of the Florida Fund, $718,700 (equivalent to 15.6% of net assets on such
day) in the case of the Massachusetts Fund, $876,900 (equivalent to 29.4% of net
assets on such day) in the case of the New York Fund, and $1,625,500 (equivalent
to 28.6% of net assets on such day) in the case of the Pennsylvania Fund. For
more information, see "Distribution Plan" in the Statement of Additional
Information.
EACH PLAN ALSO AUTHORIZES A FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .15% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .15% of the value of shares sold by such
Firm and remaining outstanding for at least one year. However, the Plan
authorizes the Trustees of the Trust on behalf of a Fund to increase payments to
the Principal Underwriter, Authorized Firms and other persons from time to time
without further actions by shareholders of the Fund, provided that the aggregate
amount of payments made to such persons under the Plan in any fiscal year of a
Fund does not exceed .25% of the Fund's average daily net assets. During the
first year after a purchase of Fund shares, the Principal Underwriter will
retain the service fee as reimbursement for the service fee payment made to
Authorized Firms at the time of sale. For the fiscal year ended March 31, 1997,
each Fund paid or accrued service fees equivalent to .15% of such Fund's average
daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
Each Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its 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 Fund 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 Fund shares;
however, no Fund is contractually obligated to continue its Plan for any
particular period of time. Suspension of the offering of Fund 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, a 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.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of a
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of a Fund through
Authorized Firms at the net asset value per share of the Fund next determined
after an order is effective. An Authorized Firm may charge its customers a fee
in connection with transactions executed by that Firm. 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 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 (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at 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 on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic [State name] Limited Maturity Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic [State name] Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
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. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Funds' agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, 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 applicable
contingent deferred sales charges (described below) and any 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.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, each Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by 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. Shares redeemed within the first year of their
purchase (except shares acquired through the reinvestment of distributions)
generally will be subject to a contingent deferred sales charge ("CDSC") equal
to 1% of the net asset value of the redeemed shares. This CDSC is imposed on any
redemption, the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions, and (c) the increase, if any, of value in the other shares in
the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a CDSC.
That is, each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first-out basis.
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the purchase of Fund shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a distribution from a retirement
plan qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
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
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
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 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 balance of shares in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE to the
Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Funds'
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares 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 Authorized Firm or to an account directly with the
Fund involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of a Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed subject to a CDSC (or equivalent early withdrawal
charge), on the basis of the net asset value per share of each fund at the time
of the exchange. Exchange offers are available only in States where shares of
the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of 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 Transfer Agent 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 Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of Fund shares acquired in an exchange, 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.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and shares
of Eaton Vance Money Market Fund acquired as the result of an exchange from an
EV Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Funds, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE 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, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund 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 Transfer Agent, First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any time
- -- whether or not distributions are reinvested. The name of the shareholder, the
Fund 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 CDSC. See "How to Redeem Fund Shares." A minimum deposit of
$5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of a Fund, provided
that the reinvestment is effected within 60 days after such redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by a Fund (or by the Fund's Transfer Agent). To the extent that
any shares of a Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the redemption,
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, 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 twenty-second day of each
month or the next business day thereafter. Each Fund anticipates that for tax
purposes the entire distribution, whether paid in cash or reinvested in
additional shares of the Fund, will constitute tax-exempt income to
shareholders, except for the proportionate part of the distribution that may be
considered taxable income if the Fund has taxable income during the calendar
year. Shareholders reinvesting the monthly distribution should treat the amount
of the entire distribution as the tax cost basis of the additional shares
acquired by reason of such reinvestment. Daily distribution crediting will
commence on the business day after collected funds for the purchase of 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.
Each Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains) and net capital gains
that it distributes to its shareholders. In satisfying these requirements, each
Fund will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios do not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time Fund shares have
been owned by the shareholder. If shares are purchased shortly before the record
date of such a distribution, the shareholder will pay the full price for the
shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether paid
in cash or reinvested in additional shares of a Fund. Tax-exempt distributions
received from a Fund are includable in a shareholder's tax base for determining
the taxability of social security and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund is not deductible to the
extent it is deemed related to the Fund's distribution of tax-exempt interest
dividends to the shareholders. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
industrial development or private activity bonds may be subject to tax on a
portion of the Fund's distributions to them of exempt interest dividends.
Accordingly, such users 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 with their tax advisers concerning the applicability
of State, local and other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. Each Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by one minus the tax rate. Each
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods assuming reinvestment of all
distributions. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any applicable CDSC at the end
of the period. Each Fund may publish annual and cumulative total return figures
from time to time. Each Fund may quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund sales charge.
Each Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of a Fund will fluctuate over
time, and any presentation of a Fund's yield or total return for any prior
period should not be considered a representation of what an investment may earn
or what the Fund's yield or total return may be in any future period. If the
expenses of a Fund or its corresponding Portfolio are allocated to 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 and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
FLORIDA. Florida's financial operations are considerably different than most
other states as Florida does not impose an individual income tax. Specifically,
Florida's constitution prohibits the levy, under the authority of the State, of
an individual income tax upon the income of natural persons who are residents or
citizens of Florida in excess of amounts which may be credited against or
deducted from any similar tax levied by the United States or any other state.
Accordingly, a constitutional amendment would be necessary to impose a state
individual income tax in excess of the foregoing constitutional limitations. The
lack of an individual income tax exposes total State tax collections to
considerably more volatility than would otherwise be the case and, in the event
of an economic downswing, could effect the State's ability to pay principal and
interest in a timely manner.
The Florida Constitution and Statutes mandate that the State budget as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each State fiscal year (July 1 - June 30). Pursuant
to a constitutional amendment which was ratified by the voters on November 8,
1994, the rate of growth in state revenues in a given fiscal year is limited to
no more than the average annual growth rate in Florida personal income over the
previous five years (revenues collected in excess of the limitation are
generally deposited into the Budget Stabilization Fund).
Financial operations of the State of Florida covering all receipts and
expenditures are maintained through the use of four funds (the General Revenue
Fund, Trust Funds, the Working Capital Fund and the Budget Stabilization Fund).
The General Revenue Fund receives the majority of State tax revenues. The Trust
Funds consist of monies received by the State which under law or trust agreement
are segregated for a purpose authorized by law. Revenues in the General Revenue
Fund which are in excess of the amount needed to meet appropriations may be
transferred to the Working Capital Fund.
The State finished the 1996 fiscal year with a working capital reserve of $150.4
million and $260.8 million in the newly established budget stabilization
reserve. For fiscal year 1995-96, the estimated General Revenue plus Working
Capital and Budget Stabilization funds available totalled $15.4 billion, a 4.0%
increase over fiscal year 1994-95. For fiscal year 1996-97, the estimated
General Revenue plus Working Capital and Budget Stabilization funds available
are reported to be $16.6 billion, a 7.7% increase over fiscal year 1995-96. The
1997 budget incorporates a 4.9% increase in revenues. The Florida and United
States unemployment rates for 1995 were 5.5% and 5.6%, respectively. The
estimated Florida and United States unemployment rates for 1996 and 1997 are
reported to be 5.3% and 5.4%, respectively.
In 1993, the State constitution was amended to limit the annual growth in the
assessed valuation of residential property. This amendment may, over time,
constrain the growth in property taxes, a major revenue source for local
governments. While no immediate ratings implications are expected, the amendment
could have a negative impact on the financial performance of local governments
over time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
General obligations of Florida are rated Aa, AA and AA by Moody's, S&P and
Fitch, respectively. S&P presently regards the outlook for the State as stable.
FLORIDA TAXES. The Florida Department of Revenue has ruled that shares of a
Florida series fund owned by a Florida resident will be exempt from the Florida
Intangible Personal Property Tax so long as the fund's portfolio includes on
January 1 of each year only assets, such as Florida tax-exempt securities and
United States Government securities, that are exempt from the Florida Intangible
Personal Property Tax. Although the date of valuation is prescribed as the close
of business on the last business day of the previous calendar year, only the
assets held in the portfolio of the fund on Jaunary 1 are to be valued.
The Florida Portfolio will normally attempt to invest substantially all of its
assets in tax-exempt obligations of Florida, the United States, the Territories
or political subdivisions of the United States or Florida ("Florida
Obligations"), and it will strive to hold, on January 1 of each year, only
assets that are exempt from the Florida intangibles tax. Accordingly, the value
of the Florida Fund shares held by a shareholder should, under normal
circumstances, be exempt from the Florida intangibles tax.
MASSACHUSETTS. In recent years, the Commonwealth has experienced a significant
economic slowdown, and has experienced shifts in employment from labor-
intensive manufacturing industries to technology and service-based industries.
The unemployment rate was 4.0% for January, 1997 as compared to January, 1996
when the unemployment rate was 4.6%. The national unemployment rate was 5.5% for
January, 1997.
Effective July 1, 1990, limitations were placed on the amount of direct bonds
the Commonwealth could have outstanding in a fiscal year, and the amount of the
total appropriation in any fiscal year that may be expended for debt service on
general obligation debt of the Commonwealth (other than certain debt incurred to
pay the fiscal 1990 deficit and certain Medicaid reimbursement payments for
prior years) was limited to 10%. In addition, the power of Massachusetts cities
and towns and certain tax-supported districts and public agencies to raise
revenue from property taxes to support their operations, including the payment
of debt service, is limited. Property taxes are virtually the only source of tax
revenues available to cities and towns to meet local costs. This limitation on
cities and towns to generate revenues could create a demand for increases in
state-funded local aid.
General obligations of Massachusetts are rated A1, A+ and A+ by Moody's, S&P and
Fitch, respectively.
MASSACHUSETTS TAXES. The Massachusetts Portfolio has received a letter ruling
(the "Ruling") from the Department of Revenue (the "Department") of The
Commonwealth of Massachusetts to the effect that it will be classified as a
partnership for Massachusetts tax purposes. The Ruling provides that,
consequently, interest income received by the Massachusetts Portfolio on (1)
debt obligations issued by The Commonwealth of Massachusetts or its political
subdivisions, including agencies or instrumentalities thereof ("Massachusetts
Obligations"), (2) the Governments of Puerto Rico, Guam, or the United States
Virgin Islands ("Possessions Obligations"), or (3) the United States ("United
States Obligations") will be treated as if realized directly by investors in the
Massachusetts Portfolio. The Ruling concludes that, provided that an investor in
the Massachusetts Portfolio qualifies as a regulated investment company ("RIC")
under the Code and satisfies certain notice requirements of Massachusetts law,
(1) dividends paid by such a RIC that are treated as tax-exempt interest under
the Code and that are directly attributable to interest on Massachusetts
Obligations (including the RIC's allocable share of interest earned by the
Massachusetts Portfolio on such obligations) and (2) dividends paid by such a
RIC that are directly attributable to interest on Possessions Obligations or
United States Obligations (including the RIC's allocable share of interest
earned by the Massachusetts Portfolio on such obligations) will, in each case,
be excluded from Massachusetts gross income. Because the Massachusetts Fund
intends to continue to invest in the Massachusetts Portfolio, qualify for
treatment as a RIC under the Code, and satisfy the applicable notice
requirements, the Massachusetts Fund's distributions to its shareholders of its
allocable share of the interest received by the Massachusetts Portfolio that is
attributable to Massachusetts Obligations, Possessions Obligations or United
States Obligations should consequently be excluded from Massachusetts gross
income for individuals, estates and trusts that are subject to Massachusetts
taxation. Distributions properly designated as capital gain dividends under the
Code and attributable to gains realized by the Massachusetts Portfolio and
allocated to the Massachusetts Fund on the sale of certain Massachusetts
tax-exempt obligations issued pursuant to statutes that specifically exempt such
gains from Massachusetts taxation will also be exempt from Massachusetts
personal income tax. Other distributions from the Massachusetts Fund that are
included in a shareholder's federal gross income, including distributions
derived from net long-term capital gains not described in the preceding sentence
and net short-term capital gains, are generally not exempt from Massachusetts
personal income tax.
For purposes of determining the Massachusetts excise tax on corporations subject
to Massachusetts taxation, distributions from the Massachusetts Fund will be
included in net income, and in the case of intangible property corporations,
shares of the Massachusetts Fund will be included in net worth.
NEW YORK. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a comparatively small share of the
nation's farming and mining activity. However, as the result of a recession
ending in the first quarter of 1993, 560,000 jobs were lost statewide (down 6.7%
from peak employment in 1989). Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been hindered
during recent years by significant cutbacks in the computer, manufacturing,
utility, defense and banking industries. Government down sizing has also
moderated these job gains. Entertainment and finance industries have had strong
growth moderating those losses. The State expects continued employment growth in
New York for 1997 though at a slower rate than 1996.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase of
tax revenues in the wake of tax reductions in 1996, with personal income tax
receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer taxes
and fees up 2.5%. Tax collections were particularly enhanced by the booming
financial sector. Growth in that sector is expected to slow in fiscal year 1998,
which could impact tax revenue growth. Government spending also declined by
0.9%, particularly capital spending and debt service.
The fiscal stability of New York State is related, at least in part, to the
fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State. In some cases, the State has had to
provide special assistance in recent years to enable such agencies, authorities
and localities to meet their financial obligations and, in some cases, to
prevent or cure defaults. To the extent State agencies and local governments
require State assistance to meet their financial obligations, the ability of the
State to meet its own obligations as they become due or to obtain additional
financing could be adversely affected.
New York's general obligations are rated A2, A- and A+ by Moody's, S&P and
Fitch, respectively. S&P currently assesses the rating outlook for New York
obligations as positive. As of June 3, 1997, New York City obligations were
rated Baa1, BBB+ and A- by Moody's, S&P and Fitch, respectively. On February 28,
1996, Fitch placed the city's general obligation bonds on Fitch Alert with
negative implications. On November 5, 1996, Fitch removed the city's general
obligation bonds from Fitch alert, although Fitch stated that the outlook
remains negative.
NEW YORK TAXES. In the opinion of Brown & Wood LLP, under New York law,
dividends paid by the New York Fund are exempt from New York State and New York
City personal income tax applicable to individuals who reside in New York to the
extent such dividends are excluded from gross income for federal income tax
purposes and are derived from interest payments on tax-exempt obligations issued
by or on behalf of New York State and its political subdivisions and agencies,
or by the governments of Puerto Rico, the U.S. Virgin Islands and Guam. Other
distributions from the New York Fund, including distributions derived from
taxable ordinary income and net short-term and long-term capital gains, are
generally not exempt from New York State or City personal income tax.
PENNSYLVANIA. Pennsylvania has long had a large representation in the steel,
mining and manufacturing industries and adverse conditions in those or other
significant industries within Pennsylvania may from time to time have a
correspondingly adverse effect on specific issuers within Pennsylvania or on
anticipated revenue to the Commonwealth. In recent years, Pennsylvania's economy
has become more diversified with major new sources of growth in the service
sector, including trade, medical and the health services, education and
financial institutions. The unadjusted unemployment rate for Pennsylvania on
March, 1997 was 5.4%.
The Governor's fiscal year 1997 proposed budget contained tax reductions
totaling $60.2 million and certain cost reduction programs, particularly in the
areas of public health and welfare. The fiscal year 1997 budget projects a small
fiscal year-end unappropriated surplus. All budgetary proposals require
legislative enactment.
Pennsylvania's general obligation debt is rated "AA-" by S&P and Fitch and "A1"
by Moody's.
PENNSYLVANIA TAXES. Pennsylvania tax counsel has advised that interest derived
by the Pennsylvania Fund from obligations which are statutorily free from state
taxation in Pennsylvania ("Exempt Obligations") are not taxable on pass through
to shareholders for purposes of the Pennsylvania personal income tax. The term
"Exempt Obligations" includes (i) those obligations issued by the Commonwealth
of Pennsylvania and its political subdivisions, agencies and instrumentalities,
the interest from which is statutorily free from state taxation in the
Commonwealth of Pennsylvania, and (ii) certain qualifying obligations of U.S.
territories and possessions, or U.S. Government obligations. Distributions
attributable to most other sources, including capital gains, will not be exempt
from Pennsylvania personal income tax.
Corporate shareholders that are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
Exempt Obligations. Distributions of capital gain attributable to Exempt
Obligations are subject to the Pennsylvania corporate net income tax. An
investment in the Pennsylvania Fund is also exempt from the Pennsylvania Gross
Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for the
year. The Pennsylvania Portfolio will report such percentage to its investors.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion has slowed through
1996. Growth is dependent on the state of the U.S. economy and the relative
stability in the price of oil, the exchange rate of the U.S. dollar and the cost
of borrowing. Section 936 of the Internal Revenue Code (a tax incentive to U.S.
companies that has encouraged economic growth in Puerto Rico) will be phased out
by 2006. It is uncertain what affect the change will have on the Puerto Rican
economy. Although the Puerto Rico unemployment rate has declined substantially
since 1985, the seasonally adjusted unemployment rate for 1996 was approximately
13.8%. The North American Free Trade Agreement (NAFTA), which became effective
January 1, 1994, could lead to the loss of Puerto Rico's lower salaried or labor
intensive jobs to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P's
outlook on Puerto Rico's rating was stable as of December 16, 1996.
<PAGE>
[GRAPHIC OMITTED]
EV CLASSIC LIMITED MATURITY MUNICIPAL FUNDS
- -------------------------------------------------------------------------------
PROSPECTUS
AUGUST 1, 1997
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-LC8/1P
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
[GRAPHIC OMITTED]
EV MARATHON
LIMITED MATURITY MUNICIPAL FUNDS
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
</TABLE>
THE EV MARATHON LIMITED MATURITY MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL
FUNDS SEEKING TO PROVIDE (1) 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 AND (2) LIMITED
PRINCIPAL FLUCTUATION. 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 INVESTING DIRECTLY IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. 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 August 1, 1997
for the Funds, as supplemented from time to time, has been filed with the
Securities and Exchange Commission (the "Commission") and is incorporated
herein by reference. This Statement of Additional Information is available
without charge from the Funds' principal underwriter, Eaton Vance
Distributors, Inc. (the "Principal Underwriter"), 24 Federal Street, Boston,
MA 02110 (telephone (800) 225-6265). The Portfolios' investment adviser is
Boston Management and Research (the "Investment Adviser"), a wholly-owned
subsidiary of Eaton Vance Management, and Eaton Vance Management is the
administrator (the "Administrator") of the Funds. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares ......................... 22
The Funds' Financial Highlights ....................... 4 Reports to Shareholders ........................... 24
The Funds' Investment Objectives ...................... 13 The Lifetime Investing Account/Distribution
Investment Policies and Risks.......................... 14 Options ......................................... 24
Organization of the Funds and the Portfolios ......... 17 The Eaton Vance Exchange Privilege ................ 25
Management of the Funds and the Portfolios ............ 18 Eaton Vance Shareholder Services .................. 26
Distribution Plans .................................... 20 Distributions and Taxes ........................... 27
Valuing Fund Shares ................................... 21 Performance Information ........................... 28
How to Buy Fund Shares ................................ 21 Appendix -- State Specific Information ............ 29
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 Redemptions during the First Five Years
(as a percentage of redemption proceeds exclusive of all reinvestments and capital appreciation in the
account) 3.00% - 0%
</TABLE>
<TABLE>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA CONNECTICUT FLORIDA MASSACHUSETTS MICHIGAN
FUND FUND FUND FUND FUND
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Adviser Fee (after any applicable fee reduction) 0.47% 0.23% 0.46% 0.47% 0.48%
Rule 12b-1 Distribution (and Service) Fees 0.90 0.88 0.90 0.90 0.90
Other Expenses 0.34 0.61 0.29 0.31 0.61
---- ---- ---- ---- ----
Total Operating Expenses (after reduction) 1.71% 1.72% 1.65% 1.68% 1.99%
==== ==== ==== ==== ====
</TABLE>
<TABLE>
EXAMPLES
- ------------------------------------------------------------------------------------------------------------------------------------
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>
CALIFORNIA CONNECTICUT FLORIDA MASSACHUSETTS MICHIGAN
FUND FUND FUND FUND FUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year $ 47 $ 47 $ 47 $ 47 $ 50
3 Years 74 74 72 73 82
5 Years 84 85 81 83 99
10 Years 147 148 140 144 178
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions:
1 Year $ 17 $ 17 $ 17 $ 17 $ 20
3 Years 54 54 52 53 62
5 Years 84 85 81 83 99
10 Years 147 148 140 144 178
</TABLE>
<TABLE>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY NEW YORK OHIO PENNSYLVANIA
FUND FUND FUND FUND
---------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Adviser Fee 0.47% 0.46% 0.48% 0.47%
Rule 12b-1 Distribution (and Service) Fees 0.90 0.89 0.90 0.90
Other Expenses 0.32 0.28 0.46 0.32
---- ---- ---- ----
Total Operating Expenses 1.69% 1.63% 1.84% 1.69%
==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
EXAMPLES
- ------------------------------------------------------------------------------------------------------------------------------------
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>
NEW JERSEY NEW YORK OHIO PENNSYLVANIA
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year $ 47 $ 47 $ 49 $ 47
3 Years 73 71 78 73
5 Years 83 80 91 83
10 Years 145 138 162 145
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions:
1 Year $ 17 $ 17 $ 19 $ 17
3 Years 53 51 58 53
5 Years 83 80 91 83
10 Years 145 138 162 145
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and
expenses they will bear, directly or indirectly, by investing in a Fund. Class
I shares convert to Class II shares approximately four years after purchase,
therefore years 5 and 10 in the Example reflect Class II expenses. See "How to
Buy Fund Shares -- Conversion Feature." Information for each Fund is based on
its expenses for the most recent fiscal year. Absent a fee reduction, the
Investment Adviser Fee would have been 0.47% and Total Operating Expenses
would have been 1.96% for the Connecticut Fund.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Funds and the Portfolios see "The Funds" Financial Highlights,"
"Management of the Funds and the Portfolios" and "How to Redeem Fund Shares."
A long-term shareholder in a Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Assocation of Securities Dealers, Inc. See "Distribution Plans."
No contingent deferred sales charge is imposed on (a) shares purchased more
than four years prior to redemption, (b) shares acquired through the
reinvestment of 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 Fund shares for shares of one or more other funds listed under
"The Eaton Vance Exchange Privilege."
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 19.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees are investing in
the Portfolios and others 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 audited
financial statements that appear in the Funds' annual report to shareholders.
The Funds' financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The financial statements and the independent auditors' report are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of a Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA FUND
----------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
---------------------------- ---------- --------- --------- ---------
CLASS I CLASS II*
--------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.080 $ 9.940 $ 9.950 $ 10.050 $ 10.340 $ 10.000
--------- -------- -------- --------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.393 $ 0.363 $ 0.385 $ 0.367 $ 0.380 $ 0.333
Net realized and
unrealized gain
(loss) on
investments (0.097) 0.037+++ 0.134 (0.027) (0.180) 0.443
--------- -------- -------- --------- --------- ---------
Total income
from operations $ 0.296 $ 0.400 $ 0.519 $ 0.340 $ 0.200 $ 0.776
--------- -------- -------- --------- --------- ---------
LESS DISTRIBUTIONS:
From net
investment
income $ (0.393) $ (0.360) $ (0.385) $ (0.367) $ (0.380) $ (0.333)
From net realized
gain on
investment
transactions -- -- -- (0.007) (0.014) --
In excess of net
investment
income(5) (0.003) -- (0.004) (0.066) (0.096) --
In excess of net
realized gain
on investment
transactions -- -- -- -- -- --
From paid-in
capital -- -- -- -- -- (0.103)
--------- -------- -------- --------- --------- ---------
Total
distributions $ (0.396) $ (0.360) $ (0.389) $ (0.440) $ (0.490) $ (0.436)
--------- -------- -------- --------- --------- ---------
NET ASSET VALUE,
end of year $ 9.980 $ 9.980 $ 10.080 $ 9.950 $ 10.050 $ 10.340
======== ======== ========= ======== ========= =========
TOTAL RETURN(1) 2.99% 3.84% 5.27% 3.53% 1.86% 7.67%
RATIOS/SUPPLEMENTAL
DATA**:
Net assets, end
of year (000
omitted) $ 25,386 $ 14,718 $ 54,241 $ 73,857 $ 82,451 $ 37,124
Ratio of net
expenses to
average daily
net assets(2)(4) 1.71% 0.90%+ 1.63% 1.55% 1.40% 1.33%+
Ratio of net
expenses to
average daily
net assets
after custodian
fee reduction(2) 1.70% 0.89%+ 1.59% -- -- --
Ratio of net
investment
income to
average daily
net assets 3.91% 4.76%+ 3.81% 3.72% 3.55% 3.77%+
PORTFOLIO TURNOVER(3) -- -- -- -- 0% 24%
**For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share
would have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(4) 1.48% 1.72%+
Expenses after
custodian fee
reduction(2) -- --
Net investment
income 3.47% 3.38%+
NET INVESTMENT
INCOME PER SHARE $ 0.377 $ 0.299
========= =========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
CONNECTICUT FUND
----------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994++
------------------------------- ------------- ------------- -------------
CLASS I CLASS II*
--------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.850 $ 9.870 $ 9.690 $ 9.690 $ 10.000
-------- -------- -------- -------- ---------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.398 $ 0.087 $ 0.379 $ 0.373 $ 0.343
Net realized and unrealized
gain (loss) on investments (0.089) (0.082) 0.150 0.026 (0.243)
-------- -------- -------- -------- ---------
Total income from operations $ 0.309 $ 0.005 $ 0.529 $ 0.399 $ 0.100
-------- -------- -------- -------- ---------
LESS DISTRIBUTIONS:
From net investment income $ (0.369) $ (0.085) $ (0.369) $ (0.373) $ (0.343)
From net realized gain on
investment transactions -- -- -- -- --
In excess of net investment
income(5) -- -- -- (0.026) (0.056)
In excess of net realized gain
on investment transactions -- -- -- -- (0.011)
-------- -------- -------- -------- ---------
Total distributions $ (0.369) $ (0.085) $ (0.369) $ (0.399) $ (0.410)
-------- -------- -------- -------- ---------
NET ASSET VALUE, -- end of year $ 9.790 $ 9.790 $ 9.850 $ 9.690 $ 9.690
======== ======== ======== ======== =========
TOTAL RETURN(1) 3.21% (0.13)% 5.50% 4.27% 0.73%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000
omitted) $ 10,227 $ 586 $ 13,014 $ 15,613 $ 14,752
Ratio of net expenses to
average daily net assets(2)(4) 1.72% 0.70%+ 1.53% 1.23% 0.86%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.68% 0.66%+ 1.49% -- --
Ratio of net investment income
to average daily net assets 3.93% 5.06%+ 3.78% 3.89% 3.50%+
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(4) 1.96% 0.94%+ 1.86% 1.81% 2.02%+
Expenses after custodian fee
reduction(2) 1.92% 0.90%+ -- -- --
Net investment income 3.69% 4.82%+ 3.45% 3.31% 2.34%+
NET INVESTMENT INCOME PER SHARE $ 0.374 $ 0.083 $ 0.346 $ 0.317 $ 0.229
======== ======== ======== ======== ========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FLORIDA FUND
------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
------------------------- --------- --------- --------- ---------
CLASS I CLASS II*
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.170 $ 10.030 $ 10.080 $ 10.060 $ 10.360 $ 10.000
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.388 $ 0.357 $ 0.383 $ 0.375 $ 0.387 $ 0.333
Net realized and
unrealized gain
(loss) on
investments (0.185) (0.049) 0.096 0.090 (0.200) 0.469
--------- --------- --------- --------- --------- ---------
Total income from
operations $ 0.203 $ 0.308 $ 0.479 $ 0.465 $ (0.187) $ 0.802
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From net investment
income $ (0.388) $ (0.357) $ (0.383) $ (0.375) $ (0.387) $ (0.333)
From net realized
gain on investment
transactions -- -- -- (0.012) (0.008) --
In excess of net
investment income(5) (0.005) (0.001) (0.006) (0.058) (0.092) --
In excess of net
realized gain on
investment
transactions -- -- -- -- -- --
From paid-in capital -- -- -- -- -- (0.109)
--------- --------- --------- --------- --------- ---------
Total distributions $ (0.393) $ (0.358) $ (0.389) $ (0.445) $ (0.487) $ (0.442)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, end of
year $ 9.980 $ 9.980 $ 10.170 $ 10.080 $ 10.060 $ 10.360
========= ========= ========= ========= ========= =========
TOTAL RETURN(1) 2.05% 2.88% 4.78% 4.79% 1.68% 7.94%
RATIOS/SUPPLEMENTAL
DATA**:
Net assets, end of
year (000 omitted) $ 48,418 $ 34,321 $ 116,781 $ 149,581 $ 162,999 $ 90,210
Ratio of net expenses
to average daily
net assets(2)(4) 1.65% 0.89%+ 1.57% 1.50% 1.42% 1.24%+
Ratio of net expenses
to average daily
net assets after
custodian fee
reduction(2) 1.63% 0.87%+ 1.56% -- -- --
Ratio of net
investment income
to average daily
net assets 3.86% 4.65%+ 3.74% 3.77% 3.57% 3.73%+
PORTFOLIO TURNOVER(3) -- -- -- -- 0% 11%
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(4) 1.49%+
Expenses after
custodian fee reduction(2) --
Net investment
income 3.48%+
NET INVESTMENT INCOME
PER SHARE $ 0.311
=========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MASSACHUSETTS FUND
-------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
-------------------------------- ------------- ------------- ------------- ------------
CLASS I CLASS II*
--------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 10.100 $ 9.940 $ 9.980 $ 9.960 $ 10.270 $ 10.000
--------- -------- -------- -------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.378 $ 0.359 $ 0.383 $ 0.383 $ 0.385 $ 0.334
Net realized and
unrealized gain
(loss) on
investments (0.106) 0.040++ 0.126 0.082 (0.197) 0.368
--------- -------- -------- -------- --------- ---------
Total income from
operations $ 0.272 $ 0.399 $ 0.509 $ 0.465 $ 0.188 $ 0.702
--------- -------- -------- -------- --------- ---------
LESS DISTRIBUTIONS:
From net investment
income $ (0.382) $ (0.349) $ (0.383) $ (0.383) $ (0.385) $ (0.334)
From net realized
gain on investment
transactions -- -- -- (0.007) (0.018) --
In excess of net
investment income(5) -- -- (0.006) (0.055) (0.095) --
In excess of net
realized gain on
investment
transactions -- -- -- -- -- --
From paid-in capital -- -- -- -- -- (0.098)
--------- -------- -------- -------- --------- ---------
Total
distributions $ (0.382) $ (0.349) $ (0.389) $ (0.445) $ (0.498) $ (0.432)
--------- -------- -------- -------- --------- ---------
NET ASSET VALUE, end
of year $ 9.990 $ 9.990 $ 10.100 $ 9.980 $ 9.960 $ 10.270
========= ======== ======== ======== ========= =========
TOTAL RETURN(1) 2.74% 3.83% 5.08% 4.84% 1.75% 6.95%
RATIOS/SUPPLEMENTAL
DATA**:
Net assets, end of
year (000 omitted) $ 41,090 $ 23,995 $ 91,809 $113,338 $ 115,121 $ 55,737
Ratio of net
expenses to
average daily net
assets(2)(4) 1.68% 0.91%+ 1.60% 1.57% 1.46% 1.24%+
Ratio of net
expenses to
average daily net
assets after
custodian fee
reduction(2) 1.66% 0.89%+ 1.58% -- -- --
Ratio of net
investment income
to average daily
net assets 3.90% 4.76%+ 3.71% 3.89% 3.61% 3.88%+
PORTFOLIO TURNOVER(3) -- -- -- -- 2% 21%
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.55%+
Net investment income 3.57%+
NET INVESTMENT INCOME PER SHARE $ 0.307
=========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
MICHIGAN FUND
---------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------------------------------------------
1997 1996 1995 1994++
------------------------ -------- -------- ---------
CLASS I CLASS II*
-------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $ 9.730 $ 9.740 $ 9.630 $ 9.650 $ 10.000
-------- -------- -------- -------- ---------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.382 $ 0.201 $ 0.383 $ 0.364 $ 0.345
Net realized and unrealized
gain (loss) on investments 0.012 0.001 0.090 0.030 (0.279)
-------- -------- -------- -------- ---------
Total income from operations $ 0.394 $ 0.202 $ 0.473 $ 0.394 $ 0.066
-------- -------- -------- -------- ---------
LESS DISTRIBUTIONS:
From net investment income $ (0.384) $ (0.201) $ (0.373) $ (0.364) $ (0.345)
From net realized gain on
investment transactions -- -- -- -- --
In excess of net investment
income(5) -- (0.001) -- (0.050) (0.071)
In excess of net realized gain
on investment transactions -- -- -- -- --
From paid-in capital -- -- -- -- --
-------- -------- -------- -------- ---------
Total distributions $ (0.384) $ (0.202) $ (0.373) $ (0.414) $ (0.416)
-------- -------- -------- -------- ---------
NET ASSET VALUE, end of year $ 9.740 $ 9.740 $ 9.730 $ 9.630 $ 9.650
======== ======== ======== ======== =========
TOTAL RETURN(1) 4.14% 1.89% 4.95% 4.24% 0.37%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000
omitted) $ 13,431 $ 406 $ 18,705 $ 26,048 $ 26,788
Ratio of net expenses to
average daily net assets(2)(4) 1.99% 1.18%+ 1.78% 1.55% 0.91%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.96% 1.15%+ 1.75% -- --
Ratio of net investment income
to average daily net assets 3.91% 4.56%+ 3.92% 3.82% 3.56%+
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.66% 1.63%+
Net investment income 3.71% 2.84%+
NET INVESTMENT INCOME PER SHARE $ 0.354 $ 0.275
======== ========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------
<CAPTION>
NEW JERSEY FUND
------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
----------------------- -------- -------- -------- --------
CLASS I CLASS II*
-------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $ 10.110 $ 9.960 $ 10.020 $ 10.030 $ 10.350 $ 10.000
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.375 $ 0.362 $ 0.383 $ 0.370 $ 0.374 $ 0.325
Net realized and unrealized
gain (loss) on investments (0.026) 0.102++ 0.093 0.068 (0.216)+++ 0.453
-------- -------- -------- -------- -------- --------
Total income from
operations $ 0.349 $ 0.464 $ 0.476 $ 0.438 $ 0.158 $ 0.778
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.389) $ (0.354) $ (0.383) $ (0.370) $ (0.374) $ (0.325)
From net realized gain on
investment transactions -- -- -- (0.018) (0.012) --
In excess of net investment
income(5) -- -- (0.003) (0.060) (0.092) --
In excess of net realized
gain on investment
transactions -- -- -- -- -- --
From paid-in capital -- -- -- -- -- (0.103)
-------- -------- -------- -------- -------- --------
Total distributions $ (0.389) $ (0.354) $ (0.386) $ (0.448) $ (0.478) $ (0.428)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 10.070 $ 10.070 $ 10.110 $ 10.020 $ 10.030 $ 10.350
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 3.53% 4.48% 4.79% 4.53% 1.44% 7.71%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000
omitted) $ 34,691 $ 22,230 $ 78,039 $ 93,361 $ 99,743 $ 58,527
Ratio of net expenses to
average daily net assets(2)(4) 1.69% 0.88%+ 1.60% 1.56% 1.51% 1.25%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.66% 0.85%+ 1.58% -- -- --
Ratio of net investment
income to average daily
net assets 3.90% 4.75%+ 3.77% 3.73% 3.50% 3.71%+
PORTFOLIO TURNOVER(3) -- -- -- -- 0% 9%
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.55%+
Net investment income 3.41%+
NET INVESTMENT INCOME PER
SHARE $ 0.299
========
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NEW YORK FUND
-----------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
------------------------- ------- ------- ------- -------
CLASS I CLASS II*
------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $10.150 $10.000 $10.030 $10.040 $10.360 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.387 $ 0.357 $ 0.374 $ 0.378 $ 0.387 $ 0.327
Net realized and unrealized
gain (loss) on investments (0.109) 0.035++ 0.135 0.049 (0.219) 0.475
------- ------- ------- ------- ------- -------
Total income from
operations $ 0.278 $ 0.392 $ 0.509 $ 0.427 $ 0.168 $ 0.802
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.387) $(0.352) $(0.374) $(0.378) $(0.387) $(0.327)
From net realized gain on
investment transactions -- -- -- (0.004) (0.008) --
In excess of net investment
income(5) (0.001) -- (0.015) (0.055) (0.093) --
In excess of net realized
gain on investment
transactions -- -- -- -- -- --
From paid-in capital -- -- -- -- -- (0.115)
------- ------- ------- ------- ------- -------
Total distributions $(0.388) $(0.352) $(0.389) $(0.437) $(0.488) $(0.442)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.040 $10.040 $10.150 $10.030 $10.040 $10.360
======= ======= ======= ======= ======= =======
TOTAL RETURN(1) 2.79% 3.74% 5.12% 4.41% 1.46% 7.95%
RATIOS/SUPPLEMENTAL DATA:**
Net assets, end of year (000
omitted) $60,097 $35,932 $133,846 $166,691 $178,251 $93,819
Ratio of net expenses to
average daily net assets(2)(4) 1.63% 0.88%+ 1.57% 1.51% 1.40% 1.21%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.61% 0.86%+ 1.55% -- -- --
Ratio of investment income
to average daily net
assets 3.84% 4.67%+ 3.66% 3.81% 3.56% 3.69%+
PORTFOLIO TURNOVER(3) -- -- -- -- -- 11%
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.47%+
Net investment income 3.43%+
NET INVESTMENT INCOME PER SHARE $ 0.305
=======
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
OHIO FUND
------------------------------------------------------------------------
YEAR ENDED MARCH 31,
------------------------------------------------------------------------
1997 1996 1995 1994++
---------------------- -------- -------- -------
CLASS I CLASS II*
-------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.840 $ 9.860 $ 9.730 $ 9.730 $10.000
-------- -------- -------- -------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.408 $ 0.205 $ 0.398 $ 0.382 $ 0.354
Net realized and unrealized gain (loss)
on investments (0.033) (0.037) 0.085 0.032 (0.194)
-------- -------- -------- -------- -------
Total income from operations $ 0.375 $ 0.168 $ 0.483 $ 0.414 $ 0.160
-------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.395) $ (0.205) $ (0.373) $ (0.382) $ (0.354)
From net realized gain on investment
transactions -- -- -- -- --
In excess of net investment income(5) -- (0.003) -- (0.032) (0.076)
In excess of net realized gain on
investment transactions -- -- -- -- --
From paid-in capital -- -- -- -- --
-------- -------- -------- -------- -------
Total distributions $ (0.395) $ (0.208) $ (0.373) $ (0.414) $(0.430)
-------- -------- -------- -------- -------
NET ASSET VALUE, end of year $ 9.820 $ 9.820 $ 9.840 $ 9.730 $ 9.730
======== ======== ======== ======== =======
TOTAL RETURN(1) 3.89% 1.51% 5.07% 4.41% 1.23%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $24,587 $ 952 $29,759 $34,279 $32,002
Ratio of net expenses to average daily
net assets(2)(4) 1.84% 1.08%+ 1.67% 1.49% 1.03%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction(2) 1.81% 1.05%+ 1.65% -- --
Ratio of investment income to average
daily net assets 4.06% 4.75%+ 4.04% 3.95% 3.53%+
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.60% 1.63%+
Net investment income 3.84% 2.93%+
NET INVESTMENT INCOME PER SHARE $ 0.371 $ 0.293
======== =======
(See footnotes on page 12.)
</TABLE>
<PAGE>
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PENNSYLVANIA FUND
-------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993++
---------------------- ------- ------- ------- -------
CLASS I CLASS II*
------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $10.190 $10.030 $10.090 $10.100 $10.390 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.392 $ 0.371 $ 0.388 $ 0.374 $ 0.399 $ 0.336
Net realized and unrealized
gain (loss) on investments (0.081) 0.063++ 0.110 0.065 (0.195) 0.490
------- ------- ------- ------- ------- -------
Total income from
operations $ 0.311 $ 0.434 $ 0.498 $ 0.439 $ 0.204 $ 0.826
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.401) $(0.364) $(0.388) $(0.374) $(0.399) $(0.336)
From net realized gain on
investment transactions -- -- -- (0.006) (0.012) --
In excess of net investment
income(5) -- -- (0.010) (0.069) (0.083) --
In excess of net realized
gain on investment
transactions -- -- -- -- -- --
From paid-in capital -- -- -- -- -- (0.100)
------- ------- ------- ------- ------- -------
Total distributions $(0.401) $(0.364) $(0.398) $(0.449) $(0.494) $(0.436)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.100 $10.100 $10.190 $10.090 $10.100 $10.390
======= ======= ======= ======= ======= =======
TOTAL RETURN(1) 3.12% 4.15% 4.98% 4.50% 1.89% 8.19%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000
omitted) $33,971 $27,907 $84,407 $103,553 $109,515 $65,005
Ratio of net expenses to
average daily net assets(2)(4) 1.69% 0.90%+ 1.62% 1.57% 1.45% 1.29%+
Ratio of net expenses to
average daily net assets
after custodian fee
reduction(2) 1.67% 0.88%+ 1.60% -- -- --
Ratio of investment income to
average daily net assets 4.05% 4.83%+ 3.79% 3.75% 3.63% 3.88%+
PORTFOLIO TURNOVER(3) -- -- -- -- 0% 18%
** For the following periods, the operating expenses of the Funds and Portfolios reflect a reduction of expenses by the
Administrator and/or Investment Adviser. Had such actions not been taken, the ratios and net investment income per share would
have been:
RATIOS (As a percentage of average daily net assets):
Expenses(2) 1.53%+
Net investment income 3.64%+
NET INVESTMENT INCOME PER SHARE $ 0.315
=======
*For the period from the start of business of Class II shares to the fiscal year end March 31, 1997. The start of business of
Class II shares for each Fund is as follows: June 27, 1996 for the California, Florida, Massachusetts, New Jersey, New York and
Pennsylvania Funds; January 21, 1997 for the Connecticut Fund; and October 22, 1996 for the Michigan and Ohio Funds.
+Annualized.
++For the period from the start of the Fund's business to the fiscal year end on March 31st. The start of business for each Fund
is as follows: May 29, 1992 for the California, Florida and New York Funds; April 16, 1993 for the
Connecticut, Michigan and Ohio Funds; and June 1, 1992 for the Massachusetts, New Jersey and Pennsylvania Funds.
+++The per share amount is not in accord with the net realized and unrealized gain (loss) on investments because of the timing of
sales of Fund shares and the amount of per share realized and unrealized gains and losses at such time.
(1)Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset
value on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on
the payable date. Total return is computed on a non-annualized basis.
(2)Includes the Fund's share of its corresponding Portfolio's allocated expenses.
(3)Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making investments directly in
securities. The portfolio turnover rate for the period since the Funds transferred substantially all of their investable assets
to their corresponding Portfolio is shown in the Portfolio's financial statements which are included in the Fund's annual
report.
(4)The expense ratios for the year ended March 31, 1996 and thereafter have been adjusted to reflect a change in reporting
guidelines. The new reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset
arrangements with its service providers or those of the Portfolio. The expense ratios for each of the prior periods have not
been adjusted to reflect this change.
(5)The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
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The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which has
the same investment objective and policies as its corresponding Fund. Each
Portfolio 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 at least investment grade quality by the
Investment Adviser.
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND (the "California
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and California State personal income taxes, and (2) limited
principal fluctuation. The California Fund seeks to meet its objective by
investing its assets in the California Limited Maturity Municipals Portfolio
(the "California Portfolio").
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND (the "Connecticut
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Connecticut State personal income taxes, and (2)
limited principal fluctuation. The Connecticut Fund seeks to meet its
objective by investing its assets in the Connecticut Limited Maturity
Municipals Portfolio (the "Connecticut Portfolio").
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND (the "Florida Fund")
seeks to provide (1) a high level of current income exempt from regular
federal income tax in the form of an investment exempt from Florida
intangibles tax, and (2) limited principal fluctuation. The Florida Fund seeks
to meet its objective by investing its assets in the Florida Limited Maturity
Municipals Portfolio (the "Florida Portfolio").
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND (the "Massachusetts
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Massachusetts State personal income taxes, and (2)
limited principal fluctuation. The Massachusetts Fund seeks to meet its
objective by investing its assets in the Massachusetts Limited Maturity
Municipals Portfolio (the "Massachusetts Portfolio").
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND (the "Michigan Fund")
seeks to provide (1) a high level of current income exempt from regular
federal income tax and Michigan State and City income and single business
taxes in the form of an investment exempt from Michigan intangibles tax, and
(2) limited principal fluctuation. The Michigan Fund seeks to meet its
objective by investing its assets in the Michigan Limited Maturity Municipals
Portfolio (the "Michigan Portfolio").
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND (the "New Jersey
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and New Jersey State personal income taxes, and (2) limited
principal fluctuation. The New Jersey Fund seeks to meet its objective by
investing its assets in the New Jersey Limited Maturity Municipals Portfolio
(the "New Jersey Portfolio").
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND (the "New York Fund")
seeks to provide (1) a high level of current income exempt from regular
federal income tax and New York State and New York City personal income taxes,
and (2) limited principal fluctuation. The New York Fund seeks to meet its
objective by investing its assets in the New York Limited Maturity Municipals
Portfolio (the "New York Portfolio").
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND (the "Ohio Fund") seeks to
provide (1) a high level of current income exempt from regular federal income
tax and Ohio State personal income taxes, and (2) limited principal
fluctuation. The Ohio Fund seeks to meet its objective by investing its assets
in the Ohio Limited Maturity Municipals Portfolio (the "Ohio Portfolio").
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND (the "Pennsylvania
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Pennsylvania State and local taxes in the form of an
investment exempt from Pennsylvania personal property taxes, and (2) limited
principal fluctuation. The Pennsylvania Fund seeks to meet its objective by
investing its assets in the Pennsylvania Limited Maturity Municipals Portfolio
(the "Pennsylvania Portfolio").
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER
DIRECTLY OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY
PRIMARILY (I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL
MARKET CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT
FROM REGULAR FEDERAL INCOME TAX, AND FROM THE STATE TAXES THAT, IN ACCORDANCE
WITH ITS INVESTMENT OBJECTIVE, THE FUND SEEKS TO AVOID. The foregoing policy
is a fundamental policy of each Fund and its corresponding Portfolio and may
not be changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be.
At least 75% of each Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which
are those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's")
or BBB or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch")) or, if unrated, determined by the
Investment Adviser to be of at least investment grade quality. The balance of
each Portfolio's net assets may be invested in municipal obligations rated
below investment grade (but not lower than B by Moody's, S&P or Fitch) and
unrated municipal obligations considered to be of comparable quality by the
Investment Adviser. Municipal obligations rated Baa or BBB may have
speculative characteristics. Also, changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than in the case of higher rated obligations. Securities
rated below Baa or BBB are commonly known as "junk bonds." A Portfolio may
retain an obligation whose rating drops below B after its acquisition if such
retention is considered desirable by the Investment Adviser. See "Additional
Risk Considerations." For a description of municipal obligation ratings, see
the Statement of Additional Information.
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, the interest on which is, in the opinion of bond
counsel, exempt from regular federal income tax. Public purpose municipal
bonds include general obligation and revenue bonds. General obligation bonds
are backed by the taxing power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility, or from the proceeds of a
specific revenue source. Some revenue bonds are payable solely or partly from
funds which are subject to annual appropriations by a State's legislature and
the availability of monies for such payments. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired
with the proceeds of an anticipated bond issue, tax revenue or facility
revenue, respectively. Under normal market conditions, a Portfolio will invest
at least 65% of its total assets in obligations issued by its respective State
or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As
at March 31, 1997, the Portfolios had invested in private activity bonds as
follows (as a percentage of net assets): California Portfolio (8.1%);
Connecticut Portfolio (2.1%); Florida Portfolio (4.5%); Massachusetts
Portfolio (12.3%); Michigan Portfolio (7.2%); New Jersey Portfolio (14.6%);
New York Portfolio (17.3%); Ohio Portfolio (9.6%); and Pennsylvania Portfolio
(9.6%). Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Funds may not be suitable for investors
subject to the AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely affected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by
a State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased
risk of loss. Each Portfolio may also invest in obligations issued by the
governments of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix
to this Prospectus for a description of some of the economic and other factors
relating to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets in
municipal obligations of the same type, including, without limitation, the
following: lease rental obligations of State and local authorities;
obligations dependent on annual appropriations by a State's legislature for
payments; obligations of State and local housing finance authorities,
municipal utilities systems or public housing authorities; obligations of
hospitals or life care facilities; or industrial development or pollution
control bonds issued for electric utility systems, steel companies, paper
companies or other purposes. This may make a Portfolio more susceptible to
adverse economic, political, or regulatory occurrences affecting a particular
category of issuer. For example, health care-related issuers are susceptible
to medicaid reimbursement policies, and national and State health care
legislation. As a Portfolio's concentration increases, so does the potential
for fluctuation in the value of the corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5%
(but not more than 25%) of its assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive
their value from another instrument, security or index. In addition, the
Portfolio may temporarily borrow up to 5% of the value of its total assets to
satisfy redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the
securities may fluctuate prior to delivery and upon delivery the securities
may be worth more or less than a Portfolio agreed to pay for them. Each
Portfolio may also purchase instruments that give the Portfolio the option to
purchase a municipal obligation when and if issued.
FUTURES TRANSACTIONS. Each Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities
(such as U.S. Government securities and municipal obligations) and securities
indices (such as the Municipal Bond Index traded on the Chicago Board of
Trade). Such transactions involve a risk of loss or depreciation due to
unanticipated adverse changes in securities prices, which may exceed a
Portfolio's initial investment in these contracts. A Portfolio may not
purchase or sell futures contracts or related options, except for closing
purchase or sale transactions, if immediately thereafter the sum of the amount
of margin deposits and premiums paid on the Portfolio's outstanding positions
would exceed 5% of the market value of the Portfolio's net assets. These
transactions involve transaction costs. There can be no assurance that the
Investment Adviser's use of futures will be advantageous to a Portfolio.
Distributions by a Fund of any gains realized on its corresponding Portfolio's
transactions in futures and options on futures will be taxable.
INSURED OBLIGATIONS. Each Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market
price paid for insured obligations may reduce a Fund's current yield.
Insurance generally will be obtained from insurers with a claims-paying
ability rated Aaa by Moody's or AAA by S&P or Fitch. The insurance does not
guarantee the market value of the insured obligations or the net asset value
of a Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower) or are unrated. As indicated above, each
Portfolio may invest in municipal obligations rated below investment grade
(but not lower than B by Moody's, S&P or Fitch) and comparable unrated
obligations. Municipal obligations rated investment grade or below and
comparable unrated municipal obligations in which a Portfolio may invest will
have speculative characteristics in varying degrees. While such obligations
may have some quality and protective characteristics, these characteristics
can be expected to be offset or outweighed by uncertainties or major risk
exposures to adverse conditions. Lower rated and comparable unrated municipal
obligations are subject to the risk of an issuer's inability to meet principal
and interest payments on the obligations (credit risk) and may also be subject
to greater price volatility due to such factors as interest rate sensitivity,
market perception of the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated municipal obligations are also
more likely to react to real or perceived developments affecting market and
credit risk than are more highly rated obligations, which react primarily to
movements in the general level of interest rates. The Investment Adviser seeks
to minimize the risks of investing in below investment grade securities
through professional investment analysis and attention to current developments
in interest rates and economic conditions. When a Portfolio invests in lower
rated or unrated municipal obligations, the achievement of the Portfolio's
goals is more dependent on the Investment Adviser's ability than would be the
case if the Portfolio were investing in municipal obligations in the higher
rating categories.
Municipal obligations held by a Portfolio which are rated below investment
grade but which, subsequent to the assignment of such rating, are backed by
escrow accounts containing U.S. Government obligations may be determined by
the Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. A Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including
defaulted obligations, if such retention is considered desirable by the
Investment Adviser; provided, however, that holdings of obligations rated
below Baa or BBB will be less than 35% of net assets. In the event the rating
of an obligation held by a Portfolio is downgraded, causing the Portfolio to
exceed this limitation, the Investment Adviser will (in an orderly fashion
within a reasonable period of time) dispose of such obligations as it deems
necessary in order to comply with the Portfolio's credit quality limitations.
In the case of a defaulted obligation, a Portfolio may incur additional
expense seeking recovery of its investment.
The net asset value of shares 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. 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 that of a fund with a longer average portfolio duration.
Changes in the credit quality of the issuers of municipal obligations held by
a Portfolio will affect the principal value of (and possibly the income earned
on) such obligations. In addition, the values of such securities are affected
by changes in general economic conditions and business conditions affecting
the specific industries of their issuers. Changes by recognized rating
services in their ratings of a security and in the ability of the issuer to
make payments of principal and interest may also affect the value of a
Portfolio's investments. The amount of information about the financial
condition of an issuer of municipal obligations may not be as extensive as
that made available by corporations whose securities are publicly traded. An
investment in shares of a Fund will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other
accounts managed by the Investment Adviser and its affiliates, holds a major
portion or all of such securities. Under adverse market or economic conditions
or in the event of adverse changes in the financial condition of the issuer,
the Portfolio could find it more difficult to sell such securities when the
Investment Adviser believes it advisable to do so or may be able to sell such
securities only at prices lower than if such securities were more widely held.
Under such circumstances, it may also be more difficult to determine the fair
value of such securities for purposes of computing the Portfolio's net asset
value.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. No Portfolio will invest in illiquid securities if more than 15%
of its net assets would be invested in securities that are not readily
marketable. No established resale market exists for certain of the municipal
obligations in which a Portfolio may invest. The market for obligations rated
below investment grade is also likely to be less liquid than the market for
higher rated obligations. As a result, a Portfolio may be unable to dispose of
these municipal obligations at times when it would otherwise wish to do so at
the prices at which they are valued.
Some of the securities in which a Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in
response to changes in market interest rates than bonds which pay interest
currently. Zero-coupon bonds are issued at a significant discount from face
value and pay interest only at maturity rather than at intervals during the
life of the security. Each Portfolio is required to accrue income from zero-
coupon bonds on a current basis, even though it does not receive that income
currently in cash, and each Fund is required to distribute its share of the
Portfolio's income for each taxable year. Thus, a Portfolio may have to sell
other investments to obtain cash needed to make income distributions.
Each Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such
leases is often subject to the appropriation by the appropriate legislative
body, on an annual or other basis, of funds for the payment of the
obligations. Investments in municipal leases are thus subject to the risk that
the legislative body will not make the necessary appropriation and the issuer
will not otherwise be willing or able to meet its obligation.
- --------------------------------------------------------------------------------
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A
SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE
INVESTMENT OBJECTIVE AND POLICIES OF EACH FUND AND PORTFOLIO ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE
TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF A FUND'S
SHAREHOLDERS OR THE INVESTORS IN THE CORRESPONDING PORTFOLIO, AS THE CASE
MAY BE.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION
OF TRUST DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The
Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series (such as the Funds). The Trustees of
the Trust have divided the shares of each Fund into two classes, Class I and
Class II. Each Class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. See "Distribution Plans" and "How
to Buy Fund Shares -- Conversion Feature." The Trustees have the authority
under the Declaration of Trust to create additional Classes of shares with
rights and privileges different from those applicable to the existing Classes
of shares.
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." There are no annual meetings of shareholders, but special
meetings may be held as required by law to elect Trustees and consider certain
other matters. Shareholders are entitled to one vote for each full share held.
Fractional shares may be voted proportionately. Shares 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.
Effective March 31, 1998, the Trustees of the Trust have approved changing the
name of each Fund to Eaton Vance [state name] Limited Maturity Municipals Fund
and restructuring each Fund's Class I shares to become Class B shares. Each
Fund's Class II shares will become Class A. Other funds with the same
investment objective and policies that invest in the same Portfolio will
become Class A and Class C. It is anticipated that this restructuring will
reduce Fund operating expenses, thereby enhancing long-term returns and
improving operational flexibility. The conversion to the multiple-class
structure will not be a taxable transaction or change the value or cost basis
of existing shareholders' investments. Likewise, the conversion will not
materially change shareholder voting rights. It is possible that some
shareholders could, in the future, receive different distributions of realized
capital gains that would be the case if the restructuring did not occur. This
result could occur because allocation of each Portfolio's current unrealized
capital gains will be different under multiple-class accounting rules than has
been the case under the partnership accounting of the current structure. The
actual realization of capital gains in the future remains uncertain and
depends not only on the Investment Adviser's decisions but also on the
fluctuating market valuation of specific securities. Because capital gains
distributions reduce the net asset value of a fund's shares, the effect of
such a distribution change is to alter current tax obligations and tax
obligations upon redemption (by the same amount).
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, affords the potential for economies of scale for each Fund
(at least when the assets of its corresponding Portfolio exceed $500 million)
and over time may result in lower expenses for a Fund.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In
addition to selling an interest to its corresponding Fund, a Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not
required to sell their shares at the same public offering price as the
corresponding Fund due to variations in sales commissions and other operating
expenses. Therefore, these differences may result in differences in returns
experienced by investors in the various 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. Information
regarding other pooled investment entities or funds which invest in a
Portfolio may be obtained by contacting the Principal Underwriter, 24 Federal
Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to
the operation of the Portfolio, which may require the corresponding Fund to
withdraw its investment in the Portfolio or take other appropriate action. Any
such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of a Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws
all of its assets from its corresponding Portfolio, or the Board of Trustees
of the Trust determines that the investment objective of such Portfolio is no
longer consistent with the investment objective of the Fund, the Trustees
would consider what action might be taken, including investing the assets of
such Fund in another pooled investment entity or retaining an investment
adviser to manage the Fund's assets in accordance with its investment
objective. A Fund's investment performance may be affected by a withdrawal of
all its assets (or the assets of another investor in the Portfolio) from its
corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund 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. BMR also
furnishes for the use of each Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolios. Under its investment advisory agreement with a Portfolio, BMR
receives a monthly advisory fee equal to the aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross
income on such day as that portion of the total daily net assets in
the same Category bears to the total daily net assets on such day) in
each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $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%
</TABLE>
Each Portfolio paid advisory fees for the fiscal year ended March 31, 1997
equivalent to the percentage of average daily net assets stated below.
<TABLE>
<CAPTION>
NET ASSETS AS OF
PORTFOLIO MARCH 31, 1997 ADVISORY FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
California $ 43,194,441 0.47%
Connecticut 12,273,967 0.23%(1)
Florida 92,909,192 0.46%
Massachusetts 69,969,936 0.47%
Michigan 14,996,432 0.48%
New Jersey 58,265,939 0.47%
New York 100,013,748 0.46%
Ohio 28,469,852 0.48%
Pennsylvania 67,875,607 0.47%
</TABLE>
(1) Absent a fee reduction, the Connecticut Portfolio would have paid advisory
fees equivalent to 0.47% of average daily net assets.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance
Corp., a publicly-held holding company which through its subsidiaries and
affiliates engages primarily in investment management, administration and
marketing activities. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Connecticut,
Michigan, New Jersey and Ohio Portfolios since October, 1994 and the Florida
and Massachusetts Portfolios since May 1, 1997. He has been a Vice President
of Eaton Vance and BMR since January, 1996 and has been an employee of Eaton
Vance since 1989.
Nicole Anderes has acted as the portfolio manager of the New York Portfolio
since May 1, 1997. She joined Eaton Vance and BMR as a Vice President in
January, 1994. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994).
Timothy T. Browse has acted as the portfolio manager of the Pennsylvania
Portfolio since May 1, 1997. He has been a Vice President of Eaton Vance and
of BMR since 1993 and an employee of Eaton Vance since 1992.
Cynthia J. Clemson has acted as the portfolio manager of the California
Portfolio since May 1, 1997. She has been a Vice President of Eaton Vance and
BMR since 1993 and an employee of Eaton Vance since 1985.
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. Each Fund, each
Portfolio and BMR have adopted Codes of Ethics relating to personal securities
transactions. The Codes permit Eaton Vance personnel to invest in securities
(including securities that may be purchased or held by a Portfolio) for their
own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing the Fund's assets in its corresponding Portfolio. As Administrator,
Eaton Vance provides the Funds with general office facilities and supervises
the overall administration of the Funds. For these services Eaton Vance
currently receives no compensation. The Trustees of the Trust may determine,
in the future, to compensate Eaton Vance for such services.
The Portfolios and the Funds, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by the Principal Underwriter under the
distribution agreement.
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
Each Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 ("1940 Act"). UNDER EACH FUND'S PLAN,
THE FUND PAYS THE PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY,
AT AN ANNUAL RATE NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS
ATTRIBUTABLE TO CLASS I SHARES. Each Fund's Plan provides hat the Fund may use
such fees to compensate the Principal Underwriter for sales commissions paid
by it to financial services firms ("Authorized Firms") on the sale of Class I
shares and for interest expenses. The Principal Underwriter uses its own funds
to pay sales commissions (except on exchange transactions and reinvestments)
to Authorized Firms at the time of sale equal to 2.5% of the purchase price of
the Class I shares sold by such Firms. Contingent deferred sales charges paid
to the Principal Underwriter will be used to reduce amounts owed to it.
Because payments to the Principal Underwriter by each Fund are limited,
uncovered distribution charges (sales commissions paid by the Principal
Underwriter plus interest, less the above fees and contingent deferred sales
charges received by it) may exist indefinitely. During the fiscal year ended
March 31, 1997, each Fund paid fees under the Plan equivalent to .75% of such
Fund's average daily net assets attributable to Class I shares for such year.
As of March 31, 1997, uncovered distribution charges amounted to approximately
$331,700 (equivalent to 1.3% of net assets on such day) in the case of the
California Fund, $235,800 (equivalent to 2.3% of net assets on such day) in
the case of the Connecticut Fund, $714,000 (equivalent to 1.5% of net assets
on such day) in the case of the Florida Fund, $475,700 (equivalent to 1.2% of
net assets on such day) in the case of the Massachusetts Fund, $330,900
(equivalent to 2.5% of net assets on such day) in the case of the Michigan
Fund, $444,900 (equivalent to 1.3% of net assets on such day) in the case of
the New Jersey Fund, $680,400 (equivalent to 1.1% of net assets on such day)
in the case of the New York Fund, $505,100 (equivalent to 2.1% of net assets
on such day) in the case of the Ohio Fund, and $348,000 (equivalent to 1.0% of
net assets on such day) in the case of the Pennsylvania Fund. For more
information, see "Distribution Plan" in the Statement of Additional
Information.
EACH PLAN ALSO AUTHORIZES A FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Trustees of the Trust have
initially implemented this provision of the Plan by authorizing a Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed .15% per annum of the Fund's average
daily net assets attributable to both Class I and Class II shares for any
fiscal year based on the value of Fund shares sold by such persons and
remaining outstanding for at least twelve months. However, a 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. For the fiscal year ended March
31, 1997, each Fund made service fee payments under the Plan as follows (as an
annualized percentage of average daily net assets): California Fund (0.15%);
Connecticut Fund (0.13%); Florida Fund (0.15%); Massachusetts Fund (0.15%);
Michigan Fund (0.15%); New Jersey Fund (0.15%); New York Fund (0.14%); Ohio
Fund (0.15%); and Pennsylvania Fund (0.15%).
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Class I shares of the Fund and/or shares of other
funds distributed by the Principal Underwriter. In some instances, such
additional incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of 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
- --------------------------------------------------------------------------------
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. The net asset value of each Class is computed by dividing the value of
the Fund's assets attributable to that Class, less the liabilities
attributable to that Class, by the number of outstanding Class shares. Because
each Fund invests its assets in an interest in its corresponding Portfolio, a
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.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of a
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
- --------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
CLASS I SHARES of a Fund may be purchased for cash or may be acquired in
exchange for acceptable securities. Investors may purchase Class I shares of a
Fund through Authorized Firms at the net asset value per Class I share of the
Fund next determined after an order is effective. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm. 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 (the "Transfer
Agent") as follows: First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The $1,000 minimum initial investment is waived
for Bank Automated Investing accounts, which may be established with an
investment of $50 or more. See "Eaton Vance Shareholder Services."
CONVERSION FEATURE. Class I shares held for the longer of (i) four years or
(ii) the time at which the contingent deferred sales charge applicable to such
shares expires (the "holding period") will automatically convert to Class II
shares. Such conversion will occur on or about the eighteenth day of the month
in which the holding period expires. For purposes of this conversion, all
distributions paid on Class I shares which the shareholder elects to reinvest
in Class I shares will be considered to be held in a separate sub-account.
Upon the conversion of Class I shares not acquired through the reinvestment of
distributions, a pro rata portion of the Class I shares held in the sub-
account will also convert to Class II shares. This portion will be determined
by the ratio that the Class I shares being converted bear to the total of
Class I shares (excluding shares acquired through reinvestment) in the
account. This conversion feature is subject to the continuing availability of
a ruling from the Internal Revenue Service or an opinion of counsel that the
conversion is not taxable for federal income tax purposes.
CLASS II SHARES are issued only in connection with the conversion feature
described above. The Trustees of the Trust may, however, offer Class II shares
in the future to limited classes of investors to be identified in the Funds'
prospectus.
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 on the day of their receipt 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 Class I share on the
day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
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 Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon [State name] Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
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. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per Fund share next computed after a redemption request
is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, during its business hours a written request for redemption in good
order, plus any share certificates with executed stock powers. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a Commission regulation and acceptable to the Transfer Agent. In
addition, in some cases, good order may require the furnishing of additional
documents such as where shares are registered in the name of a corporation,
partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a
repurchase order with the Authorized Firm, which may charge a fee. The value
of such shares is based upon the net asset value calculated after the
Principal Underwriter, as the Funds' agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, 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
applicable contingent deferred sales charges (described below) imposed on
Class I shares and any 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.
If shares were recently purchased, the proceeds of a redemption will not be
sent until the check (including a certified or cashier's check) received for
the shares purchased has cleared. Payment for shares tendered for redemption
may be delayed up to fifteen days from the purchase date when the purchase
check has not yet cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, each Fund reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by 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 of Class I shares.
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 ("CDSC"). This CDSC 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
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 CDSC. That is, each redemption will be assumed to have been made
first from the exempt amounts referred to in clauses (a), (b) and (c) above,
and second through liquidation of those shares in the account referred to in
clause (c) on a first-in-first-out basis. Any CDSC which is required to be
imposed on share redemptions will be made in accordance with the following
schedule:
YEAR OF
REDEMPTION
AFTER PURCHASE CDSC
- --------------------------------------------------------------------------------
First 3.0%
Second 2.5%
Third 2.0%
Fourth 1.0%
Fifth and following 0.0%
In calculating the CDSC upon the redemption of Class I shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of Class I shares acquired in the exchange is
deemed to have occurred at the time of the original purchase of the exchanged
shares.
No CDSC will be imposed on redemptions of Class II shares of a Fund. No CDSC
will be imposed on Fund shares which have been sold to Eaton Vance or its
affiliates, or to their respective employees or clients. The CDSC applicable
to Class I shares will also be waived for shares redeemed (1) pursuant to a
Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of a
required distribution from a tax-sheltered retirement plan or (3) following
the death of all beneficial owners of such shares, provided the redemption is
requested within one year of death (a death certificate and other applicable
documents may be required). In addition, shares acquired as a result of a
merger or liquidation of another Eaton Vance sponsored fund will have a CDSC
imposed at the same rate as would have been imposed in the prior fund.
Unless a shareholder specifies otherwise, redemption requests placed by
shareholders who own both Class I and Class II shares will be satisfied first
by redeeming Class I shares that are no longer subject to a CDSC, then by
redeeming Class II shares. If the Class II shares were acquired as the result
of a conversion of certificated Class I shares, the certificate must be
returned to the Transfer Agent before a redemption of such Class II shares can
be processed.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Funds' independent certified public accountants.
Shortly after the end of each calendar year, each Fund will furnish its
shareholders with information necessary for preparing federal and state tax
returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
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 balance and Class of shares in the
account. THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE
ADDITIONAL INVESTMENTS IN SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE
to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA, 01581-5123 (please provide the name of
the shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Funds' dividend disbursing agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA, 01581-5123. The currently effective option will appear
on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares 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 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 Authorized Firm or to an
account directly with the Fund involves special procedures and will require
the beneficial owner to obtain historical purchase information about the
shares in the account from the Authorized Firm. Before establishing a "street
name" account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should
determine whether the Authorized Firm which will hold the shares allows
reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of each Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund) or Eaton Vance Money Market Fund, which
are subject to a CDSC. Shares of each Fund may also be exchanged for shares of
Eaton Vance Prime Rate Reserves, which are subject to an early withdrawal
charge, and shares of a money market fund sponsored by an Authorized Firm and
approved by the Principal Underwriter (an "Authorized Firm Fund"). Any such
exchange will be made on the basis of the net asset value per share of each
fund at the time of the exchange. Exchange offers are available only in States
where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of 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 Transfer Agent 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 Transfer Agent for additional information concerning the
exchange privilege. Applications and prospectuses of other funds are available
from Authorized Firms or the Principal Underwriter. The prospectus for each
fund describes its investment objectives and policies, and shareholders should
obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the 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, except
that time during which shares are held in an Authorized Firm fund will not be
credited toward completion of the CDSC period. For the CDSC or early
withdrawal charge schedule applicable to Eaton Vance Prime Rate Reserves and
Class I shares of any EV Marathon Limited Maturity Municipals Fund, see "How
to Redeem Fund Shares." The CDSC applicable to the other funds in the Eaton
Vance Marathon Group of Funds is 5%, 5%, 4%, 3%, 2%, or 1% in the event of a
redemption occurring in the first, second, third, fourth, fifth or sixth year,
respectively, after the original share purchase.
Shares of the funds listed above may be exchanged for Class I shares of a Fund
on the basis of the net asset value per share of each fund at the time of the
exchange, but subject to any restrictions or qualifications set forth in the
current prospectus of any such fund. Shares of such Funds may be so exchanged
for Class II shares if the shares to be exchanged were acquired as the result
of an exchange of Class II shares.
Telephone exchanges are accepted by the Transfer Agent, provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, Monday through
Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by
telephone exchange must be registered in the same name(s) and with the same
address as the shares being exchanged. Neither the Funds, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE 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, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund 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 Transfer Agent, First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any time
- -- whether or not distributions 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 CDSC. See "How to Redeem Fund Shares." A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed Class I shares may
reinvest, with credit for any CDSC paid on the redeemed Class I shares, any
portion or all of the redemption proceeds (plus that amount necessary to
acquire a fractional share to round off the purchase to the nearest full
share) in Class I shares of a Fund, provided that the reinvestment is effected
within 60 days after such redemption, and the privilege has not been used more
than once in the prior 12 months. 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 the period beginning
30 days before and ending 30 days after the date of the redemption, some or
all of the loss generally will not be allowed as a tax deduction. Shareholders
should consult their tax advisers concerning the tax consequences of
reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, 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. Each Fund anticipates that for tax
purposes the entire distribution, whether paid in cash or reinvested in
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. Shareholders reinvesting the monthly distribution should 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 business day after 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.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code") and to satisfy all
requirements necessary to avoid paying federal income taxes on the part of its
investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gains) and net capital gains that
it distributes to shareholders. In satisfying these requirements, each Fund
will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the
Portfolio properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders substantially all of its ordinary income and capital gain net
income in accordance with the timing requirements imposed by the Code. As
partnerships under the Code, the Portfolios do not pay federal income or
excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net short-
term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such
for federal income tax purposes, regardless of the length of time Fund shares
have been owned by the shareholder. If shares are purchased shortly before the
second date of such a distribution, the shareholder will pay the full price
for the shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether
paid in cash or reinvested in additional shares 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.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund is not deductible to the
extent it is deemed related to the Fund's distributions of tax-exempt interest
dividends to the shareholder. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development or private activity bonds may be subject to
tax on a portion of the Fund's distributions to them of exempt interest
dividends. Accordingly, such user 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 with their tax advisers concerning the
applicability of State, local or other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN OF CLASS I SHARES. The current yield of a Fund's Class I shares
is calculated by dividing the net investment income per share earned during a
recent 30-day period by the maximum offering price per share (net asset value)
on the last day of the period and annualizing the resulting figure. A taxable-
equivalent yield is computed by using the tax-exempt yield figure and dividing
by one minus the tax rate. The average annual total return of a Fund's 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 assuming reinvestment of all
distributions. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any applicable CDSC for
Class I shares at the end of the period. Each Fund may also publish annual and
cumulative total return figures for Class I shares from time to time.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of a Fund will fluctuate
over time, and any presentation of a Fund's yield or total return for any
prior period should not be considered a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of a Fund or its corresponding Portfolio are allocated to
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 and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there
can be no assurance that particular bond issues may not be adversely affected
by changes in economic, political or other conditions. Unless stated
otherwise, the ratings indicated are for obligations of the State. A State's
political subdivisions may have different ratings which are unrelated to the
ratings assigned to State obligations.
CALIFORNIA. From the latter years of the 1980s through fiscal year 1992-1993,
California weathered a turbulent period of repeated budgetary imbalance. Even
as rapid population growth escalated the demand for government services, an
economic recession ravaged the State's revenue base and drove expenditures
above budget appropriations.
Bolstered by strengthening revenues, reduced caseload growth and an improving
economy, the State has begun to experience some relief from the serious
budgetary pressures that characterized a significant portion of the decade.
Reflecting the belief shared by many analysts that the California economy
would remain strong, the 1996-1997 Budget Act allocated a State budget of some
$63 billion. In the context of optimistic revenue projections released by the
Department of Finance, the Budget Act granted a $230 million tax cut to
corporations while simultaneously providing an increase in funding for
education and prisons. However, only a relatively modest amount, $287 million,
was allocated to the reserve fund available for emergencies such as
earthquakes.
Nonetheless, the State's budgetary fortunes continue to be subject to
unforeseeable events. In December, 1994, for example, Orange County,
California and its Investment Pool filed for bankruptcy. A plan of adjustment
has been approved by the court and became effective under which all non-
municipal creditors are to be paid in full. However, the ultimate financial
impact on the County and the State cannot be predicted with any certainty. In
addition, constant fluctuations in other factors affecting the State --
including health and welfare caseloads, property tax receipts, federal funding
and extraordinary expenditures related to natural disasters -- will
undoubtedly create new budget challenges.
Furthermore, certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives
could produce adverse effects on the California economy. Among these are
measures that have established tax, spending or appropriations limits and
prohibited the imposition of certain new taxes, authorized the transfers of
tax liabilities and reallocations of tax receipts among governmental entities
and provided for minimum levels of funding.
Finally, certain bonds in the Portfolio may be subject to provisions of
California law that could adversely affect payments on those bonds or limit
the remedies available to bondholders. Among these are bonds of health care
institutions which are subject to the strict rules and limits regarding
reimbursement payments of California's Medi-Cal Program for health care
services to welfare beneficiaries, and bonds secured by liens on real
property.
General obligation bonds of the State of California are currently rated A1 by
Moody's and A+ by S&P.
CALIFORNIA TAXES. California law provides that dividends paid by the
California Fund and designated by the California Fund as tax-exempt are exempt
from California personal income tax on individuals who reside in California to
the extent such dividends are derived from interest payments on municipal
obligations exempt from California State personal income taxes, provided that
at least 50% of the assets of the California Portfolio at the close of each
quarter of its taxable year are invested in obligations the interest on which
is exempt under either federal or California law from taxation by the State of
California. Distributions of short-term capital gains are treated as ordinary
income, and distributions of long-term capital gains are treated as long-term
capital gains taxable at ordinary income rates under the California personal
income tax.
CONNECTICUT. Historically, Connecticut's economic structure has been
concentrated in manufacturing, including a heavy component of defense-related
industries, which increases the State's vulnerability to economic cycles and
to declines in federal government defense spending. More recently,
Connecticut's level of manufacturing activity has declined, but this has been
partially offset by extensive urban development, a large insurance sector,
relocations of corporate headquarters to Connecticut (specifically to
Fairfield County), and the extension of other service sectors. For 1996, the
unemployment rate in Connecticut on a seasonally adjusted basis was 5.0%, as
compared to a rate of 5.4% nationwide.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. The State has about $6 billion of general obligation bonds
outstanding, of which more than half have been issued for general state
purposes. The remaining general obligation bonds were issued for highway
construction, mass transit, and rental housing. Debt indicators have been
rising and are high at $1,963 of net direct debt per capita. Certain
Connecticut municipalities have experienced severe fiscal difficulties and
have reported operating and accumulated deficits in recent years. Regional
economic difficulties, reductions in revenues, and increased expenses could
lead to further fiscal problems for the State and its political subdivisions,
authorities, and agencies. This could result in declines in the value of their
outstanding obligations, reductions in their ability to pay interest and
principal thereon, and increases in their future borrowing costs.
General obligations of the State of Connecticut are rated AA-, Aa and AA by
S&P, Moody's and Fitch, respectively.
CONNECTICUT TAXES. In the opinion of Day, Berry & Howard, special Connecticut
tax counsel to the Connecticut Fund, shareholders of the Connecticut Fund will
not be subject to the Connecticut personal income tax on the Connecticut
taxable income of individuals, trusts, and estates in the case of
distributions received from the Connecticut Fund to the extent that such
distributions qualify as exempt-interest dividends for federal income tax
purposes and are derived from interest on tax-exempt obligations issued by or
on behalf of the State of Connecticut and its political subdivisions or the
authorities, instrumentalities, or districts of any of them, or on tax-exempt
obligations the interest on which Connecticut is prohibited from taxing by
federal law, e.g., tax-exempt obligations that are issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam.
Other distributions from the Connecticut Fund, including dividends
attributable to obligations of issuers in other states and all long-term and
short-term capital gains, will not be exempt from the Connecticut personal
income tax, except that capital gain dividends derived from obligations issued
by or on behalf of the State of Connecticut or its political subdivisions or
the authorities, instrumentalities or districts of any of them will not be
subject to such tax. Distributions from the Connecticut Fund that constitute
items of tax preference for purposes of the federal alternative minimum tax
will not be subject to the net Connecticut minimum tax applicable to taxpayers
subject to the Connecticut personal income tax and required to pay the federal
alternative minimum tax, to the extent qualifying as exempt-interest dividends
derived from obligations issued by or on behalf of the State of Connecticut
and its political subdivisions or the authorities, instrumentalities, or
districts of any of them, or from obligations the interest on which
Connecticut is prohibited from taxing by federal law, but other distributions
from the Connecticut Fund could cause or increase liability for the net
Connecticut minimum tax. The Connecticut Fund will report annually to its
shareholders the percentage and source, on a state-by-state basis, of interest
income received by the Connecticut Fund on municipal bonds during the
preceding year.
Distributions from investment income and capital gains, including exempt-
interest dividends derived from interest that is exempt from Connecticut
personal income tax and federal income tax, will be subject to the Connecticut
Corporation Business Tax if received by a corporation subject to such tax,
except for any portion thereof other than amounts qualifying as exempt-
interest dividends or capital gain dividends for federal income tax purposes
that might qualify for the dividends-received deduction provided under that
Connecticut tax, and all such distributions may be subject to state and local
taxes in states other than Connecticut.
FLORIDA. Florida's financial operations are considerably different than most
other states as Florida does not impose an individual income tax.
Specifically, Florida's constitution prohibits the levy, under the authority
of the State, of an individual income tax upon the income of natural persons
who are residents or citizens of Florida in excess of amounts which may be
credited against or deducted from any similar tax levied by the United States
or any other state. Accordingly, a constitutional amendment would be necessary
to impose a state individual income tax in excess of the foregoing
constitutional limitations. The lack of an individual income tax exposes total
State tax collections to considerably more volatility than would otherwise be
the case and, in the event of an economic downswing, could effect the State's
ability to pay principal and interest in a timely manner.
The Florida Constitution and Statutes mandate that the State budget as a
whole, and each separate fund within the State budget, be kept in balance from
currently available revenues each State fiscal year (July 1 - June 30).
Pursuant to a constitutional amendment which was ratified by the voters on
November 8, 1994, the rate of growth in state revenues in a given fiscal year
is limited to no more than the average annual growth rate in Florida personal
income over the previous five years (revenues collected in excess of the
limitation are generally deposited into the Budget Stabilization Fund).
Financial operations of the State of Florida covering all receipts and
expenditures are maintained through the use of four funds (the General Revenue
Fund, Trust Funds, the Working Capital Fund and the Budget Stabilization
Fund). The General Revenue Fund receives the majority of State tax revenues.
The Trust Funds consist of monies received by the State which under law or
trust agreement are segregated for a purpose authorized by law. Revenues in
the General Revenue Fund which are in excess of the amount needed to meet
appropriations may be transferred to the Working Capital Fund.
The State finished the 1996 fiscal year with a working capital reserve of
$150.4 million and $260.8 million in the newly established budget
stabilization reserve. For fiscal year 1995-96, the estimated General Revenue
plus Working Capital and Budget Stabilization funds available totalled $15.4
billion, a 4.0% increase over fiscal year 1994-95. For fiscal year 1996-97,
the estimated General Revenue plus Working Capital and Budget Stabilization
funds available are reported to be $16.6 billion, a 7.7% increase over fiscal
year 1995-96. The 1997 budget incorporates a 4.9% increase in revenues. The
Florida and United States unemployment rates for 1995 were 5.5% and 5.6%,
respectively. The estimated Florida and United States unemployment rates for
1996 and 1997 are reported to be 5.3% and 5.4%, respectively.
In 1993, the State constitution was amended to limit the annual growth in the
assessed valuation of residential property. This amendment may, over time,
constrain the growth in property taxes, a major revenue source for local
governments. While no immediate ratings implications are expected, the
amendment could have a negative impact on the financial performance of local
governments over time and lead to ratings revisions which may have a negative
impact on the prices of affected bonds.
General obligations of Florida are rated Aa, AA and AA by Moody's, S&P and
Fitch, respectively. S&P presently regards the outlook for the State as
stable.
FLORIDA TAXES. The Florida Department of Revenue has ruled that shares of a
Florida series fund owned by a Florida resident will be exempt from the
Florida Intangible Personal Property Tax so long as the fund's portfolio
includes on January 1 of each year only assets, such as Florida tax-exempt
securities and United States Government securities, that are exempt from the
Florida Intangible Personal Property Tax. Although the date of valuation is
prescribed as the close of business on the last business day of the previous
calendar year, only the assets held in the portfolio of the fund on January 1
are to be valued.
The Florida Portfolio will normally attempt to invest substantially all of its
assets in tax-exempt obligations of Florida, the United States, the
Territories or political subdivisions of the United States or Florida
("Florida Obligations"), and it will strive to hold on January 1 of each year,
only assets that are exempt from the Florida intangibles tax. Accordingly, the
value of the Florida Fund shares held by a shareholder should, under normal
circumstances, be exempt from the Florida intangibles tax.
MASSACHUSETTS. In recent years, the Commonwealth has experienced a significant
economic slowdown, and has experienced shifts in employment from labor-
intensive manufacturing industries to technology and service-based industries.
The unemployment rate was 4.0% for January, 1997 as compared to January, 1996,
when the unemployment rate was 4.6%. The national unemployment rate was 5.5%
for January, 1997.
Effective July 1, 1990, limitations were placed on the amount of direct bonds
the Commonwealth could have outstanding in a fiscal year, and the amount of
the total appropriation in any fiscal year that may be expended for debt
service on general obligation debt of the Commonwealth (other than certain
debt incurred to pay the fiscal 1990 deficit and certain Medicaid
reimbursement payments for prior years) was limited to 10%. In addition, the
power of Massachusetts cities and towns and certain tax-supported districts
and public agencies to raise revenue from property taxes to support their
operations, including the payment of debt service, is limited. Property taxes
are virtually the only source of tax revenues available to cities and towns to
meet local costs. This limitation on cities and towns to generate revenues
could create a demand for increases in state-funded local aid.
General obligations of Massachusetts are rated A1, A+ and A+ by Moody's, S&P
and Fitch, respectively.
MASSACHUSETTS TAXES. The Massachusetts Portfolio has received a letter ruling
(the "Ruling") from the Department of Revenue (the "Department") of The
Commonwealth of Massachusetts to the effect that it will be classified as a
partnership for Massachusetts tax purposes. The Ruling provides that,
consequently, interest income received by the Massachusetts Portfolio on (1)
debt obligations issued by The Commonwealth of Massachusetts or its political
subdivisions, including agencies or instrumentalities thereof ("Massachusetts
Obligations"), (2) the Governments of Puerto Rico, Guam, or the United States
Virgin Islands ("Possessions Obligations"), or (3) the United States ("United
States Obligations") will be treated as if realized directly by investors in
the Massachusetts Portfolio. The Ruling concludes that, provided that an
investor in the Massachusetts Portfolio qualifies as a regulated investment
company ("RIC") under the Code and satisfies certain notice requirements of
Massachusetts law, (1) dividends paid by such a RIC that are treated as tax-
exempt interest under the Code and that are directly attributable to interest
on Massachusetts Obligations (including the RIC's allocable share of interest
earned by the Massachusetts Portfolio on such obligations) and (2) dividends
paid by such a RIC that are directly attributable to interest on Possessions
Obligations or United States Obligations (including the RIC's allocable share
of interest earned by the Massachusetts Portfolio on such obligations) will,
in each case, be excluded from Massachusetts gross income. Because the
Massachusetts Fund intends to continue to invest in the Massachusetts
Portfolio, qualify for treatment as a RIC under the Code, and satisfy the
applicable notice requirements, the Massachusetts Fund's distributions to its
shareholders of its allocable share of the interest received by the
Massachusetts Portfolio that is attributable to Massachusetts Obligations,
Possessions Obligations or United States Obligations should consequently be
excluded from Massachusetts gross income for individuals, estates and trusts
that are subject to Massachusetts taxation. Distributions properly designated
as capital gain dividends under the Code and attributable to gains realized by
the Massachusetts Portfolio and allocated to the Massachusetts Fund on the
sale of certain Massachusetts tax-exempt obligations issued pursuant to
statutes that specifically exempt such gains from Massachusetts taxation will
also be exempt from Massachusetts personal income tax. Other distributions
from the Massachusetts Fund that are included in a shareholder's federal gross
income, including distributions derived from net long-term capital gains not
described in the preceding sentence and net short-term capital gains, are
generally not exempt from Massachusetts personal income tax.
For purposes of determining the Massachusetts excise tax on corporations
subject to Massachusetts taxation, distributions from the Massachusetts Fund
will be included in net income, and in the case of intangible property
corporations, shares of the Massachusetts Fund will be included in net worth.
MICHIGAN. Michigan has long had a large representation in and is dominated by
the automobile industry and related industries and tends to be more vulnerable
to economic cycles than other states and the nation as a whole. For January,
1997, Michigan's unemployment rate was 4.9%, as compared to the national rate
of 5.4%. In March, 1994, Michigan voters approved changes to the tax system
resulting in, among other things, an increase in the sales tax rate, a
reduction in the income tax rate and the creation of a statewide property tax.
Michigan's general obligation debt is rated A1, AA and AA, by Moody's, S&P and
Fitch, respectively.
MICHIGAN TAXES. The Michigan Fund has received an opinion from Butzel Long,
special Michigan tax counsel to the Michigan Fund, to the effect that
shareholders of the Michigan Fund who are subject to the Michigan state income
tax, municipal income tax or single business tax will not be subject to such
taxes on their Michigan Fund dividends to the extent that such distributions
are exempt-interest dividends for federal income tax purposes and are
attributable to interest on obligations held by the Michigan Portfolio and
allocated to the Michigan Fund which is exempt from regular federal income tax
and is exempt from Michigan State and City income taxes, Michigan single
business tax and in the form of an investment exempt from the Michigan
intangibles tax ("Michigan tax-exempt obligations"). Other distributions with
respect to shares of the Michigan Fund including, but not limited to, long or
short-term capital gains, will be subject to the Michigan income tax or single
business tax and may be subject to the city income taxes imposed by certain
Michigan cities. The opinion also provides that shares of the Michigan Fund
will be exempt from the Michigan intangibles tax to the extent the Michigan
Portfolio's assets consist of Michigan tax-exempt obligations and any other
securities or obligations that are exempt from the Michigan intangibles tax.
The Michigan intangibles tax is being phased out; thus, even if it applies to
a portion of income from the Fund (for instance, due to non-Michigan
investments), it is now reduced and will be eliminated by 1998.
NEW JERSEY. Fiscal year 1996 ended with total revenues up 4.3% to $15.6
billion. However, total spending increased to $16.3 billion. As of January 1,
1996, New Jersey fulfilled Governor Whitman's promised personal income tax cut
of 30%. Even so, tax revenues were up in all categories with income tax
receipts up by 4.3%. The higher spending level resulted in a decrease of total
fund balances to $880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue $2.8
billion of bonds to fund the state's pension liability. The plan would free up
$647 million of funds for the current year but has raised budgetary sleight-
of-hand concerns. Largely, however, the New Jersey economy has performed well,
growing faster than its Mid-Atlantic neighbors, though slower than the nation
as a whole.
New Jersey's general obligation debt is rated Aa1, AA+ and AA+ by Moody's, S&P
and Fitch, respectively.
NEW JERSEY TAXES. The New Jersey Fund intends to satisfy New Jersey's
statutory requirements for treatment as a "Qualified Investment Fund." The
Fund has obtained an opinion of its special tax counsel, Wilentz, Goldman &
Spitzer, P.A., that, provided the New Jersey Fund limits its investments to
those described in this Prospectus and otherwise satisfies such statutory
requirements, shareholders of the New Jersey Fund which are individuals,
estates or trusts will not be required to include in their New Jersey gross
income distributions from the New Jersey Fund that are attributable to
interest or gain realized by the New Jersey Fund from obligations the interest
on which is exempt from regular federal income tax and is exempt from New
Jersey State personal income tax or other obligations statutorily free from
New Jersey taxation. However, with regard to corporate shareholders, such
counsel is also of the opinion that distributions from the New Jersey Fund
will not be excluded from net income and shares of the New Jersey Fund will
not be excluded from investment capital in determining New Jersey corporation
business (franchise) and corporation income taxes for corporate shareholders.
NEW YORK. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with
a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a comparatively
small share of the nation's farming and mining activity. However, as the
result of a recession ending in the first quarter of 1993, 560,000 jobs were
lost statewide (down 6.7% from peak employment in 1989). Although the State
has added approximately 240,000 jobs since late 1992, employment growth in the
State has been hindered during recent years by significant cutbacks in the
computer, manufacturing, utility, defense and banking industries. Government
downsizing has also moderated these job gains. Entertainment and finance
industries have had strong growth, moderating those losses. The State expects
continued employment growth in New York for 1997, though at a slower rate than
1996.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase
of tax revenues in the wake of tax reductions in 1996, with personal income
tax receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer
taxes and fees up 2.5%. Tax collections were particularly enhanced by the
booming financial sector. Growth in that sector is expected to slow in fiscal
year 1998, which could impact tax revenue growth. Government spending also
declined by 0.9%, particularly capital spending and debt service.
The fiscal stability of New York State is related, at least in part, to the
fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State. In some cases, the State has had to
provide special assistance in recent years to enable such agencies,
authorities and localities to meet their financial obligations and, in some
cases, to prevent or cure defaults. To the extent State agencies and local
governments require State assistance to meet their financial obligations, the
ability of the State to meet its own obligations as they become due or to
obtain additional financing could be adversely affected.
New York's general obligations are rated A2, A- and A+ by Moody's, S&P and
Fitch, respectively. S&P currently assesses the rating outlook for New York
obligations as positive. As of June 3, 1997, New York City obligations were
rated Baa1, BBB+ and A- by Moody's, S&P and Fitch, respectively. On February
28, 1996, Fitch placed the City's general obligation bonds on Fitch Alert with
negative implications. On November 5, 1996, Fitch removed the City's general
obligation bonds from FitchAlert, although Fitch stated that the outlook
remains negative.
NEW YORK TAXES. In the opinion of Brown & Wood LLP, under New York law,
dividends paid by the New York Fund are exempt from New York State and New
York City personal income tax applicable to individuals who reside in New York
to the extent such dividends are excluded from gross income for federal income
tax purposes and are derived from interest payments on tax-exempt obligations
issued by or on behalf of New York State and its political subdivisions and
agencies, or by the governments of Puerto Rico, the U.S. Virgin Islands and
Guam. Other distributions from the New York Fund, including distributions
derived from taxable ordinary income and net short-term and long-term capital
gains, are generally not exempt from New York State or City personal income
tax.
OHIO. The State's economy is reliant in part on durable goods manufacturing,
largely concentrated in motor vehicles and equipment, steel, rubber products
and household appliances. As a result, general economic activity in Ohio, as
in many other industrially developed states, tends to be more cyclical than in
some other states and in the nation as a whole. In fiscal 1993, a projected
$520 million budget gap was addressed through tax revisions and appropriation
cuts. By fiscal year 1996, the State had replenished its Budget Stabilization
Fund to a level of $828.3 million. Revenues continue to grow at a faster rate
than expenditures; 3.2% versus 2.2%. The state continues to maintain a solid
financial position.
General obligations of Ohio are rated AA+ and Aa1 by S&P and Moody's,
respectively (except that highway obligations are rated Aaa by S&P).
OHIO TAXES. In the opinion of special tax counsel to the Ohio Fund, Squire,
Sanders & Dempsey L.L.P., under Ohio law individuals who are otherwise subject
to the Ohio personal income tax will not be subject to such tax on dividends
paid by the Ohio Fund to the extent such dividends are properly attributable
to interest on obligations issued by or on behalf of the State of Ohio or its
political subdivisions, or the agencies or instrumentalities thereof ("Ohio
obligations"). Dividends paid by the Ohio Fund also will be excluded from the
net income base of the Ohio corporation franchise tax to the extent such
dividends are excluded from gross income for federal income tax purposes or
are properly attributable to interest on Ohio obligations. However, the Ohio
Fund's shares will be included in the tax base for purposes of computing the
Ohio corporation franchise tax on the net worth basis. These conclusions
regarding Ohio taxation are based on the assumption that the Ohio Fund will
continue to qualify as a regulated investment company under the Code and that
at all times at least 50% of the value of the total assets of the Ohio Fund
will consist of Ohio obligations or similar obligations of other states or
their subdivisions determined, to the extent the Ohio Fund invests in the Ohio
Portfolio, by treating the Ohio Fund as owning its proportionate share of the
assets owned by the Ohio Portfolio.
PENNSYLVANIA. Pennsylvania has long had a large representation in the steel,
mining and manufacturing industries and adverse conditions in those or other
significant industries within Pennsylvania may from time to time have a
correspondingly adverse effect on specific issuers within Pennsylvania or on
anticipated revenue to the Commonwealth. In recent years, Pennsylvania's
economy has become more diversified with major new sources of growth in the
service sector, including trade, medical and the health services, education
and financial institutions. The unadjusted unemployment rate for Pennsylvania
on March, 1997 was 5.4%.
The Governor's fiscal year 1997 proposed budget contained tax reductions and
certain cost reduction programs, particularly in the areas of public health
and welfare. The fiscal year 1997 budget projects a small fiscal year-end
unappropriated surplus. All budgetary proposals require legislative enactment.
Pennsylvania's general obligation debt is rated "AA-" by S&P and Fitch and
"A1" by Moody's.
PENNSYLVANIA TAXES. Pennsylvania tax counsel has advised that interest derived
by the Pennsylvania Fund from obligations which are statutorily free from
state taxation in Pennsylvania ("Exempt Obligations") are not taxable on pass
through to shareholders for purposes of the Pennsylvania personal income tax.
The term "Exempt Obligations" includes (i) those obligations issued by the
Commonwealth of Pennsylvania and its political subdivisions, agencies and
instrumentalities, the interest from which is statutorily free from state
taxation in the Commonwealth of Pennsylvania, and (ii) certain qualifying
obligations of U.S. territories and possessions, or U.S. Government
obligations. Distributions attributable to most other sources, including
capital gains, will not be exempt from Pennsylvania personal income tax.
Corporate shareholders that are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions of
interest made by the Pennsylvania Fund, provided such distributions are
attributable to Exempt Obligations. Distributions of capital gain attributable
to Exempt Obligations are subject to the Pennsylvania corporate net income
tax. An investment in the Pennsylvania Fund is also exempt from the
Pennsylvania Gross Premiums tax.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the obligations
held by the Pennsylvania Portfolio consist of Exempt Obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal
property taxes.
For individual shareholders who are residents of the City of Philadelphia,
distributions of interest derived from Exempt Obligations will not be taxable
for purposes of the Philadelphia School District Investment Net Income Tax
("Philadelphia School District Tax"), provided that the Pennsylvania Portfolio
reports to its investors the percentage of Exempt Obligations held by it for
the year. The Pennsylvania Portfolio will report such percentage to its
investors.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly
from fiscal 1984 through fiscal 1990, the rate of this expansion has slowed
through 1996. Growth is dependent on the state of the U.S. economy and the
relative stability in the price of oil, the exchange rate of the U.S. dollar
and the cost of borrowing. Section 936 of the Internal Revenue Code (a tax
incentive to U.S. companies that has encouraged economic growth in Puerto
Rico) will be phased out by 2006. It is uncertain what affect the change will
have on the Puerto Rican economy. Although the Puerto Rico unemployment rate
has declined substantially since 1985, the seasonally adjusted unemployment
rate for 1996 was approximately 13.8%. The North American Free Trade Agreement
(NAFTA), which became effective January 1, 1994, could lead to the loss of
Puerto Rico's lower salaried or labor intensive jobs to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P's
outlook on Puerto Rico's rating was stable as of December 16, 1996.
<PAGE>
[Logo]
EATON VANCE
================
Mutual Funds
EV MARATHON LIMITED MATURITY MUNICIPAL FUNDS
- --------------------------------------------------------------------------------
PROSPECTUS
AUGUST 1, 1997
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street,
Boston, MA 02110 (800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123 (800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-LC8/1P
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
LIMITED MATURITY MUNICIPAL FUNDS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
</TABLE>
THE EV TRADITIONAL LIMITED MATURITY MUNICIPAL FUNDS (THE "FUNDS") ARE MUTUAL
FUNDS SEEKING TO PROVIDE (1) 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 AND (2) LIMITED PRINCIPAL FLUCTUATION.
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 INVESTING DIRECTLY IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. 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 August 1, 1997 for the Funds,
as supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by reference.
This Statement of Additional Information is available without charge from the
Funds' principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolios' investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and
Eaton Vance Management is the administrator (the "Administrator") of the Funds.
The offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
AS OF THE DATE OF THIS COMBINED PROSPECTUS, A FUND MAY NOT BE AVAILABLE FOR
PURCHASE IN CERTAIN STATES. PLEASE CONTACT THE PRINCIPAL UNDERWRITER OR YOUR
BROKER FOR FURTHER INFORMATION.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PAGE
Shareholder and Fund Expenses ............................................ 2
The Funds' Financial Highlights .......................................... 3
The Funds' Investment Objectives ......................................... 7
Investment Policies and Risks ............................................ 7
Organization of the Funds and the Portfolios ............................. 11
Management of the Funds and the Portfolios ............................... 12
Service Plans ............................................................ 14
Valuing Fund Shares ...................................................... 14
How to Buy Fund Shares ................................................... 14
How to Redeem Fund Shares ................................................ 16
Reports to Shareholders .................................................. 18
The Lifetime Investing Account/Distribution Options ...................... 18
The Eaton Vance Exchange Privilege ....................................... 19
Eaton Vance Shareholder Services ......................................... 19
Distributions and Taxes .................................................. 20
Performance Information .................................................. 21
Appendix -- State Specific Information ................................... 22
- --------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 2.25%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA CONNECTICUT FLORIDA MICHIGAN NEW JERSEY NEW YORK OHIO
FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ------- -------- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Adviser Fee
(after any fee reduction) 0.47% 0.23% 0.46% 0.48% 0.47% 0.46% 0.48%
Other Expenses (including
Service Plan Fees and
after expense allocations) 0.67 1.04 0.30 0.94 0.66 0.36 1.01
--- --- --- --- --- --- ---
Total Operating Expenses
(after reductions) 1.14% 1.27% 0.76% 1.42% 1.13% 0.82% 1.49%
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
EXAMPLES
- ----------------------------------------------------------------------------------------------------------------------
An investor would pay the following maximum initial sales charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period:
<CAPTION>
CALIFORNIA CONNECTICUT FLORIDA MICHIGAN NEW JERSEY NEW YORK OHIO
FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ------- -------- ---------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 34 $ 35 $ 30 $ 37 $ 34 $ 31 $ 37
3 Years 58 62 46 66 58 48 69
5 Years 84 91 64 98 83 67 102
10 Years 158 172 115 189 157 122 196
</TABLE>
NOTES:
The table and Examples summarize the aggregate expenses of the Funds and the
Portfolios and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in a Fund. Information for
each Fund is based on such Fund's expenses for the most recent fiscal year.
Absent a fee reduction and an expense allocation, the Investment Adviser Fee,
Other Expenses and Total Operating Expenses would have been 0.47%, 1.85% and
2.32%, respectively, for the Connecticut Fund. Absent an expense allocation,
Other Expenses and Total Operating Expenses would be 1.05% and 1.52%,
respectively, for the California Fund; 0.89% and 1.35%, respectively, for the
Florida Fund; 1.88% and 2.36%, respectively, for the Michigan Fund; 1.42% and
1.89%, respectively, for the New Jersey Fund; 3.83% and 4.29%, respectively, for
the New York Fund; and 1.10% and 1.58%, respectively, for the Ohio Fund.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual return
will vary. For further information regarding the expenses of the Funds and the
Portfolios see "The Funds" Financial Highlights," "Management of the Funds and
the Portfolios" and "Service Plans."
No sales charge is payable at the time of purchase on investments of $1 million
or more. However, a contingent deferred sales charge of 0.50% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. See "How to Buy Fund Shares" and "How to Redeem Fund Shares."
Each Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 12.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees are investing in the
Portfolios and others 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 audited
financial statements that appear in the Funds' annual report to shareholders.
The Funds' financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The financial statements and the independent auditors' report are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of a Fund is contained in its
annual report to shareholders which may be obtained without charge by contacting
the Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA FUND CONNECTICUT FUND
-------------------------------------- --------------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
-------------------------------------- --------------------------------------
1997 1996 1995 1994* 1997 1996 1995 1994*
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.650 $ 9.520 $ 9.570 $10.000 $ 9.610 $ 9.460 $ 9.500 $10.000
------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.430 $ 0.376 $ 0.348 $ 0.098 $ 0.414 $ 0.350 $ 0.344 $ 0.072
Net realized and unrealized gain
(loss) on investments (0.090) 0.124 0.003++ (0.400) (0.079) 0.156 0.002++ (0.475)
------- ------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $ 0.340 $ 0.500 $ 0.351 $(0.302) $ 0.335 $ 0.506 $ 0.346 $(0.403)
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.430) $(0.370) $(0.348) $(0.098) $(0.414) $(0.350) $(0.344) $(0.072)
In excess of net investment
income(1) -- -- (0.053) (0.030) (0.001) (0.006) (0.042) (0.025)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.430) $(0.370) $(0.401) $(0.128) $(0.415) $(0.356) $(0.386) $(0.097)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.560 $ 9.650 $ 9.520 $ 9.570 $ 9.530 $ 9.610 $ 9.460 $ 9.500
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 3.58% 5.39% 3.80% (3.16%) 3.54% 5.49% 3.78% (4.14%)
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year
(000 omitted) $ 2,831 $ 4,800 $ 7,970 $14,479 $ 1,339 $ 1,728 $ 1,583 $ 2,051
Ratio of net expenses to
average daily net assets(3)(4) 1.14% 1.54% 1.51% 1.48%+ 1.27% 1.62% 1.37% 1.38%+
Ratio of net expenses to
average daily net assets, after
custodian fee reduction(3) 1.13% 1.50% -- -- 1.23% 1.58% -- --
Ratio of net investment income
to average daily net assets 4.49% 3.90% 3.75% 2.91%+ 4.32% 3.62% 3.70% 2.70%+
**The operating expenses of the Funds reflect an allocation of expenses to the Administrator and/or Investment Adviser.
Had such actions not been taken, net investment income per share and the ratios would have been:
RATIOS (As a percentage of average daily net assets):
Expenses(3)(4) 1.52% 1.81% 1.81% 1.98%+ 2.32% 2.88% 3.01% 2.78%+
Expenses after custodian fee
reduction(2) 1.51% 1.77% -- -- 2.28% 2.84% -- --
Net investment income 4.11% 3.63% 3.45% 2.41%+ 3.27% 2.36% 2.06% 1.30%+
NET INVESTMENT INCOME PER SHARE $ 0.394 $ 0.350 $ 0.320 $ 0.081 $ 0.313 $ 0.228 $ 0.192 $ 0.035
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(See footnotes on page 6.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLORIDA FUND MICHIGAN FUND
---------------------------- -----------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
---------------------------- -----------------------------------
1997 1996 1995* 1997 1996 1995 1994*
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.120 $10.070 $10.000 $ 9.580 $ 9.480 $ 9.490 $10.000
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.480 $ 0.451 $ 0.321 $ 0.425 $ 0.376 $ 0.352 $ 0.100
Net realized and unrealized gain (loss) on
investments (0.181) 0.070++ 0.088 0.025 0.095 0.039++ (0.484)
------- ------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.299 $ 0.521 $ 0.409 $ 0.450 $ 0.471 $ 0.391 $(0.384)
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.469) $(0.451) $(0.321) $(0.430) $(0.371) $(0.352) $(0.100)
In excess of net investment income(1) -- (0.020) (0.018) -- -- (0.049) (0.026)
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.469) $(0.471) $(0.339) $(0.430) $(0.371) $(0.401) $(0.126)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.950 $10.120 $10.070 $ 9.600 $ 9.580 $ 9.480 $ 9.490
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 2.90% 5.33% 4.19% 4.78% 5.10% 4.26% (3.99%)
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 3,790 $ 2,325 $ 241 $ 1,034 $ 2,340 $ 6,904 $ 8,874
Ratio of net expenses to average daily
net assets(3)(4) 0.76% 0.89% 0.74%+ 1.42% 1.83% 1.56% 1.15%+
Ratio of net expenses to average daily
net assets, after custodian fee
reduction(3) 0.74% 0.87% -- 1.39% 1.79% -- --
Ratio of net investment income to average
daily net assets 4.73% 4.26% 4.52%+ 4.45% 3.94% 3.80% 3.07%+
**The operating expenses of the Funds reflect an allocation of expenses to the Administrator and/or Investment Adviser.
Had such actions not been taken, net investment income (loss) per share and the ratios would have been:
RATIOS (As a percentage of average daily net assets):
Expenses(3)(4) 1.35% 2.48% 12.20%+ 2.36% 2.15% 1.99% 2.35%+
Expenses after custodian fee reduction(2) 1.33% 2.46% -- 2.33% -- -- --
Net investment income (loss) 4.14% 2.67% (6.94%)+ 3.51% 3.62% 3.37% 1.87%+
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.420 $ 0.283 $(0.506) $ 0.335 $ 0.345 $ 0.312 $ 0.061
======= ======= ======= ======= ======= ======= =======
</TABLE>
(See footnotes on page 6.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW JERSEY FUND NEW YORK FUND
------------------------------------- ---------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------------------- ---------------------------
1997 1996 1995 1994* 1997 1996 1995*
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.670 $ 9.590 $ 9.570 $10.000 $10.220 $10.030 $10.000
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.425 $ 0.368 $ 0.345 $ 0.099 $ 0.459 $ 0.465 $ 0.325
Net realized and unrealized
gain (loss) on investments (0.050) 0.077 0.071 (0.404) (0.099) 0.196 0.051
------- ------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.375 $ 0.445 $ 0.416 $(0.305) $ 0.360 $ 0.661 $ 0.376
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.425) $(0.365) $(0.345) $(0.099) $(0.459) $(0.465) $(0.325)
In excess of net investment income(1) -- -- (0.051) (0.026) (0.011) (0.006) (0.021)
From net realized gain on investments -- -- -- -- (0.060) -- --
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.425) $(0.365) $(0.396) $(0.125) $(0.530) $(0.471) $(0.346)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.620 $ 9.670 $ 9.590 $ 9.570 $10.050 $10.220 $10.030
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 3.94% 4.77% 4.49% (3.20%) 3.58% 6.68% 3.87%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 1,049 $ 1,907 $ 3,306 $ 3,148 $ 589 $ 425 $ 180
Ratio of net expenses to
average daily net assets(3)(4) 1.13% 1.54% 1.61% 1.57%+ 0.82% 0.61% 0.98%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction(3) 1.10% 1.52% -- -- 0.80% 0.58% --
Ratio of net investment income to average
daily net assets 4.40% 3.78% 3.62% 3.08%+ 4.50% 4.52% 5.96%+
**The operating expenses of the Funds reflect an allocation of expenses to the Administrator and/or Investment Adviser.
Had such actions not been taken, net investment income (loss) per share and the ratios would have been:
RATIOS (As a percentage of average daily net assets):
Expenses(3)(4) 1.89% 2.30% 2.16% 2.88%+ 4.29% 2.87% 28.54%+
Expenses after custodian fee reduction(2) 1.86% 2.28% -- -- 4.27% 2.84% --
Net investment income (loss) 3.64% 3.02% 3.07% 1.77%+ 1.04% 2.26% (21.60%)+
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.351 $ 0.291 $ 0.293 $ 0.057 $ 0.107 $ 0.233 $(1.178)
======= ======= ======= ======= ======= ======= =======
</TABLE>
(See footnotes on page 6.)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO FUND
-------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------------------
1997 1996 1995 1994*
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.610 $ 9.530 $ 9.500 $10.000
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.424 $ 0.358 $ 0.358 $ 0.095
Net realized and unrealized gain (loss) on investments (0.019) 0.088 0.068 (0.473)
------- ------- ------- -------
Total income (loss) from operations $ 0.405 $ 0.446 $ 0.426 $(0.378)
------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.425) $(0.358) $(0.358) $(0.095)
In excess of net investment income(1) -- (0.008) (0.038) (0.027)
------- ------- ------- -------
Total distributions $(0.425) $(0.366) $(0.396) $(0.122)
------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.590 $ 9.610 $ 9.530 $ 9.500
======= ======= ======= =======
TOTAL RETURN(2) 4.27% 4.81% 4.63% (3.91%)
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 2,740 $ 3,543 $ 5,090 $ 5,795
Ratio of net expenses to average daily net assets(3)(4) 1.49% 2.01% 1.60% 1.27%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction(3) 1.46% 1.99% -- --
Ratio of net investment income to average daily net assets 4.40% 3.70% 3.81% 3.04%+
**The operating expenses of the Funds reflect an allocation of expenses to the
Administrator and/or Investment Adviser. Had such actions not been taken, net
investment income (loss) per share and the ratios would have been:
RATIOS (As a percentage of average daily net assets):
Expenses(3)(4) 1.58% 2.10% 1.95%+
Expenses after custodian fee reduction(2) 1.55% -- --
Net investment income (loss) 4.31% 3.32% 2.36%+
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.415 $ 0.311 $ 0.074
======= ======= =======
* For the period from the start of the Fund's business to the fiscal year end on March 31st. The start of business for each
Fund is as follows: December 8, 1993 for the California, Michigan, New Jersey and Ohio Funds; December 27, 1993 for the
Connecticut Fund; July 5, 1994 for the Florida Fund; and July 6, 1994 for the New York Fund.
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the timing
of sales of Fund shares and the amount of per share realized and unrealized gains and losses at such time.
(1) The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax earnings and profits that result in
temporary over-distributions for financial statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
(2) Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset
value on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on
the payable date. Total return is computed on a non-annualized basis.
(3) Includes each Fund's share of its corresponding Portfolio's allocated expenses.
(4) The expense ratios for the year ended March 31, 1996 and thereafter have been adjusted to reflect a change in reporting
guidelines. The new reporting guidelines require the Fund, as well as its corresponding Portfolio, to increase their expense
ratio by the effect of any expense offset arrangements with their service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- -------------------------------------------------------------------------------
The investment objective of each Fund is set forth below. Each Fund currently
seeks to meet its investment objective by investing its assets in a separate
corresponding open-end management investment company (a "Portfolio") which has
the same investment objective and policies as its corresponding Fund. Each
Portfolio 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 at least investment grade quality by the Investment Adviser.
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND (the "California
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and California State personal income taxes, and (2) limited
principal fluctuation. The California Fund seeks to meet its objective by
investing its assets in the California Limited Maturity Municipals Portfolio
(the "California Portfolio").
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND (the "Connecticut
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and Connecticut State personal income taxes, and (2) limited
principal fluctuation. The Connecticut Fund seeks to meet its objective by
investing its assets in the Connecticut Limited Maturity Municipals Portfolio
(the "Connecticut Portfolio").
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND (the "Florida Fund")
seeks to provide (1) a high level of current income exempt from regular federal
income tax in the form of an investment exempt from Florida intangibles tax, and
(2) limited principal fluctuation. The Florida Fund seeks to meet its objective
by investing its assets in the Florida Limited Maturity Municipals Portfolio
(the "Florida Portfolio").
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND (the "Michigan Fund")
seeks to provide (1) a high level of current income exempt from regular federal
income tax and Michigan State and City income and single business taxes in the
form of an investment exempt from Michigan intangibles tax, and (2) limited
principal fluctuation. The Michigan Fund seeks to meet its objective by
investing its assets in the Michigan Limited Maturity Municipals Portfolio (the
"Michigan Portfolio").
EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND (the "New Jersey
Fund") seeks to provide (1) a high level of current income exempt from regular
federal income tax and New Jersey State personal income taxes, and (2) limited
principal fluctuation. The New Jersey Fund seeks to meet its objective by
investing its assets in the New Jersey Limited Maturity Municipals Portfolio
(the "New Jersey Portfolio").
EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND (the "New York Fund")
seeks to provide (1) a high level of current income exempt from regular federal
income tax and New York State and New York City personal income taxes, and (2)
limited principal fluctuation. The New York Fund seeks to meet its objective by
investing its assets in the New York Limited Maturity Municipals Portfolio (the
"New York Portfolio").
EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND (the "Ohio Fund") seeks to
provide (1) a high level of current income exempt from regular federal income
tax and Ohio State personal income taxes, and (2) limited principal fluctuation.
The Ohio Fund seeks to meet its objective by investing its assets in the Ohio
Limited Maturity Municipals Portfolio (the "Ohio Portfolio").
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND FROM THE STATE TAXES THAT, IN ACCORDANCE WITH ITS
INVESTMENT OBJECTIVE, EACH FUND SEEKS TO AVOID. The foregoing policy is a
fundamental policy of each Fund and its corresponding Portfolio and may not be
changed unless authorized by a vote of the Fund's shareholders or that
Portfolio's investors, as the case may be.
At least 75% of each Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The balance of each Portfolio's net
assets may be invested in municipal obligations rated below investment grade
(but not lower than B by Moody's, S&P or Fitch) and unrated municipal
obligations considered to be of comparable quality by the Investment Adviser.
Municipal obligations rated Baa or BBB may have speculative characteristics.
Also, changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than in the
case of higher rated obligations. Securities rated below Baa or BBB are commonly
known as "junk bonds." A Portfolio may retain an obligation whose rating drops
below B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
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, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a State's legislature and the availability of monies
for such payments. Municipal notes include bond anticipation, tax anticipation
and revenue anticipation notes. Bond, tax and revenue anticipation notes are
short-term obligations that will be retired with the proceeds of an anticipated
bond issue, tax revenue or facility revenue, respectively. Under normal market
conditions, a Portfolio will invest at least 65% of its total assets in
obligations issued by its respective State or its political subdivisions.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
March 31, 1997, the Portfolios had invested in such obligations as follows (as a
percentage of net assets): California Portfolio (8.1%); Connecticut Portfolio
(2.1%); Florida Portfolio (4.5%); Michigan Portfolio (7.2%); New Jersey
Portfolio (14.6%); New York Portfolio (17.3%); and Ohio Portfolio (9.6%).
Distributions to corporate investors of certain interest income may also be
subject to the AMT. The Funds may not be suitable for investors subject to the
AMT.
CONCENTRATION. Each Portfolio will concentrate its investments in municipal
obligations issued by its respective State and that State's political
subdivisions. Each Portfolio is, therefore, more susceptible to factors
adversely affecting issuers in one State than mutual funds which do not
concentrate in a specific State. Municipal obligations of issuers in a single
State may be adversely affected by economic developments (including insolvency
of an issuer) and by legislation and other governmental activities in that
State. Municipal obligations that rely on an annual appropriation of funds by a
State's legislature for payment are also subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. To
the extent that a Portfolio's assets are concentrated in municipal obligations
of issuers of a single State, that Portfolio may be subject to an increased risk
of loss. Each Portfolio may also invest in obligations issued by the governments
of Puerto Rico, the U.S. Virgin Islands and Guam. See the Appendix to this
Prospectus for a description of some of the economic and other factors relating
to the States and Puerto Rico.
In addition, each Portfolio may invest 25% or more of its total assets in
municipal obligations of the same type, including, without limitation, the
following: lease rental obligations of State and local authorities; obligations
dependent on annual appropriations by a State's legislature for payments;
obligations of State and local housing finance authorities, municipal utilities
systems or public housing authorities; obligations of hospitals or life care
facilities; or industrial development or pollution control bonds issued for
electric utility systems, steel companies, paper companies or other purposes.
This may make a Portfolio more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuer. For example,
health care-related issuers are susceptible to medicaid reimbursement policies,
and national and State health care legislation. As a Portfolio's concentration
increases, so does the potential for fluctuation in the value of the
corresponding Fund's shares.
NON-DIVERSIFIED STATUS. As "non-diversified" investment companies, each
Portfolio may invest, with respect to 50% of its total assets, more than 5% (but
not more than 25%) of its total assets in the securities of any issuer. A
Portfolio is likely to invest a greater percentage of its assets in the
securities of a single issuer than would a diversified fund. Therefore, a
Portfolio is more susceptible to any single adverse economic or political
occurrence or development affecting issuers of the relevant State's municipal
obligations.
OTHER INVESTMENT PRACTICES
Each Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. Each Portfolio may purchase securities on a "when-
issued" basis, which means that payment and delivery occur on a future
settlement date. The price and yield of such securities are generally fixed on
the date of commitment to purchase. However, the market value of the securities
may fluctuate prior to delivery and upon delivery the securities may be worth
more or less than a Portfolio agreed to pay for them. Each Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
FUTURES TRANSACTIONS. Each Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed a Portfolio's initial investment
in these contracts. A Portfolio may not purchase or sell futures contracts or
related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to a Portfolio. Distributions by a Fund of any gains
realized on its corresponding Portfolio's transactions in futures and options on
futures will be taxable.
INSURED OBLIGATIONS. Each Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market price
paid for insured obligations may reduce a Fund's current yield. Insurance
generally will be obtained from insurers with a claims-paying ability rated Aaa
by Moody's or AAA by S&P or Fitch. The insurance does not guarantee the market
value of the insured obligations or the net asset value of a Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower) or are unrated. As indicated above, each
Portfolio may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
Municipal obligations rated investment grade or below and comparable unrated
municipal obligations in which a Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When a Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by a Portfolio which are rated below investment grade
but which, subsequent to the assignment of such rating, are backed by escrow
accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. A Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by a Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, a Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares 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. 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 that of a fund with a longer average portfolio duration. Changes in
the credit quality of the issuers of municipal obligations held by a Portfolio
will affect the principal value of (and possibly the income earned on) such
obligations. In addition, the values of such securities are affected by changes
in general economic conditions and business conditions affecting the specific
industries of their issuers. Changes by recognized rating services in their
ratings of a security and in the ability of the issuer to make payments of
principal and interest may also affect the value of a Portfolio's investments.
The amount of information about the financial condition of an issuer of
municipal obligations may not be as extensive as that made available by
corporations whose securities are publicly traded. An investment in shares of a
Fund will not constitute a complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
The secondary market for some municipal obligations issued within a State
(including issues which are privately placed with a Portfolio) is less liquid
than that for taxable debt obligations or other more widely traded municipal
obligations. The Portfolio will not invest in illiquid securities if more than
15% of its net assets would be invested in securities that are not readily
marketable. No established resale market exists for certain of the municipal
obligations in which a Portfolio may invest. The market for obligations rated
below investment grade is also likely to be less liquid than the market for
higher rated obligations. As a result, the Portfolio may be unable to dispose of
these municipal obligations at times when it would otherwise wish to do so at
the prices at which they are valued.
Some of the securities in which a Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. Each Portfolio is required to accrue income from zero- coupon bonds on
a current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
Each Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body; on an
annual or other basis of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
EACH FUND AND PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF EACH FUND AND PORTFOLIO ARE NOT FUNDAMENTAL POLICIES
AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE PORTFOLIO
WITHOUT OBTAINING THE APPROVAL OF A FUND'S SHAREHOLDERS OR THE INVESTORS IN
THE CORRESPONDING PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
- --------------------------------------------------------------------------------
EACH FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are
responsible for the overall management and supervision of its affairs. The Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series (such as the Funds). Each share represents an equal
proportionate beneficial interest in a Fund. 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." There are no annual meetings of
shareholders, but special meetings may be held as required by law to elect
Trustees and consider certain other matters. Shareholders are entitled to one
vote for each full share held. Fractional shares may be voted proportionately.
Shares have no preemptive or conversion rights and are freely transferable. In
the event of the liquidation of a Fund, shareholders of that Fund are entitled
to share pro rata in the net assets available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved restructuring
each Fund whereby each Fund will become the Class A shares of an Eaton Vance
[state name] Limited Maturity Municipals Fund. Other funds with the same
investment objective and policies that invest in the same Portfolio will become
Class B and Class C. It is anticipated that this restructuring will reduce Fund
operating expenses, thereby enhancing long-term returns and improving
operational flexibility. The conversion to the multiple-class structure will not
be a taxable transaction or change the value or cost basis of existing
shareholders' investments. Likewise, the conversion will not materially change
shareholder voting rights. It is possible that some shareholders could, in the
future, receive different distributions of realized capital gains than would be
the case if the restructuring did not occur. This result could occur because
allocation of each Portfolio's current unrealized capital gains will be
different under multiple-class accounting rules than has been the case under the
partnership accounting of the current structure. The actual realization of
capital gains in the future remains uncertain and depends not only on the
Investment Adviser's decisions but also on the fluctuating market valuation of
specific securities. Because capital gains distributions reduce the net asset
value of a fund's shares, the effect of such a distribution change is to alter
current tax obligations and tax obligations upon redemption (by the same
amount).
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, affords the potential for economies of scale for each Fund (at least
when the assets of its corresponding Portfolio exceed $500 million) and over
time may result in lower expenses for a Fund.
EACH PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to its corresponding Fund, a Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in a Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the corresponding Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various 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. Information regarding other pooled investment entities or
funds which invest in a Portfolio may be obtained by contacting the Principal
Underwriter, 24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the corresponding Fund to withdraw
its investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of a
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws all
of its assets from its corresponding Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of such Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of such Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. A Fund's
investment performance may be affected by a withdrawal of all its assets (or the
assets of another investor in the Portfolio) from its corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund 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. BMR also furnishes for the
use of each Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolios. Under
its investment advisory agreement with a Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
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 the period ended March 31, 1997, each Portfolio paid advisory fees
equivalent to the percentage of average daily net assets stated below.
NET ASSETS AS OF
PORTFOLIO MARCH 31, 1997 ADVISORY FEE
- ------------------------------------------------------------------------------
California $ 43,194,441 0.47%
Connecticut $ 12,273,967 0.23%(1)
Florida $ 92,909,192 0.46%
Michigan $ 14,996,432 0.48%
New Jersey $ 58,265,939 0.47%
New York $100,013,748 0.46%
Ohio $ 28,469,852 0.48%
(1)Absent a fee reduction, the Connecticut Portfolio would have paid BMR
advisory fees equivalent to 0.47% of average daily net assets.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Connecticut,
Michigan, New Jersey and Ohio Portfolios since October, 1994 and the Florida
Portfolio since May 1, 1997. He has been Vice President of Eaton Vance and BMR
since January, 1996 and has been an employee since 1989.
Nicole Anderes has acted as the portfolio manager of the New York Portfolio
since May 1, 1997. She joined Eaton Vance and BMR as a Vice President in
January, 1994. Prior to joining Eaton Vance, she was a Vice President and
portfolio manager at Lazard Freres Asset Management (1992-1994).
Cynthia J. Clemson has acted as the portfolio manager of the California
Portfolio since May 1, 1997. She has been a Vice President of Eaton Vance and
BMR since 1993 and an employee of Eaton Vance since 1985.
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. Each Fund, each Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by a Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of each Fund by
investing the Fund's assets in its 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 the Principal Underwriter under the
distribution agreement.
SERVICE PLANS
- -------------------------------------------------------------------------------
In addition to advisory fees and other expenses, each Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. EACH FUND'S PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO
THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have initially implemented
each Fund's Plan by authorizing the Fund to make quarterly service fee payments
to the Principal Underwriter and Authorized Firms in amounts not expected to
exceed .15% of the Fund's average daily net assets for any 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. During the fiscal year ended March 31,
1997, each Fund paid or accrued service fees (as a percentage of average daily
net assets) as follows: California Fund (.15%); Connecticut Fund (.15%); Florida
Fund (.13%); Michigan Fund (.15%); New Jersey Fund (.12%); New York Fund (.15%);
and Ohio Fund (.15%).
VALUING FUND SHARES
- --------------------------------------------------------------------------------
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 and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio), based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of a Fund through
Authorized Firms at the effective public offering price, which price is based on
the effective net asset value per share plus the applicable sales charge. A Fund
receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm. 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.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention or Right of Accumulation or various
Employee Benefit Plans are available from Authorized Firms or the Principal
Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.25% 2.30% 2.00%
$100,000 but less than $250,000 1.75 1.78 1.50
$250,000 but less than $500,000 1.50 1.52 1.25
$500,000 but less than $1,000,000 1.00 1.01 1.00
$1,000,000 or more 0.00* 0.00* 0.50
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more, or where the amount invested represents redemption proceeds
from a mutual fund unaffiliated with Eaton Vance, if the redemption occurred
no more than 60 days prior to the purchase of Fund shares and the redeemed
shares were subject to a sales charge. A contingent deferred sales charge
("CDSC") of 0.50% will be imposed on such investments (as described below) in
the event of certain redemptions within 12 months of purchase.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in 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 (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
Shares of a Fund may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolios; to clients and
current officers and employees of Eaton Vance, its affiliates and other
investment advisers of Eaton Vance sponsored funds; to registered
representatives, employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Shares may also be
issued at net asset value (1) in connection with the merger of an investment
company with a Fund, (2) to investors making an investment as part of a fixed
fee program whereby an entity unaffiliated with the Investment Adviser provides
multiple investment services, such as management, brokerage and custody, and (3)
to investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place trades
for their own accounts if the accounts are linked to the master account of such
investment advisor, financial planner or other intermediary on the books and
records of the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code"), and "rabbi trusts."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional [State name] Limited Maturity Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional [State name] Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
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. 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.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period, then out of the initial purchase (or subsequent purchases
if necessary) 5% of the dollar amount specified on the application shall be held
in escrow by the escrow agent in the form of shares (computed to the nearest
full share at the public offering price applicable to the initial purchase
hereunder) registered in the investor's name. All income dividends and capital
gains distributions on escrowed shares will be paid to the investor or to the
investor's order. When the minimum investment so specified is completed, the
escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustment will be made only on those shares purchased through the
Firm then handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- -------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Princpal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Funds' agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, a Fund will make payment in cash for the net asset value of the
shares as of the date determined above and reduced by the amount of any 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.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, each Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required if the cause of the low account
balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more, or if
shares were purchased at net asset value because the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance (as
described under "How to Buy Fund Shares"), and are redeemed within 12 months of
purchase, a CDSC of 0.50% will be imposed on such redemption. The CDSC will be
imposed on an amount equal to the lesser of the current market value or the
original purchase price of the shares redeemed. Accordingly, no CDSC will be
imposed on increases in account value above the initial purchase price,
including any distributions that have been reinvested in additional shares. In
determining whether a CDSC is applicable to a redemption, it will be assumed
that redemptions are made first from any shares in the shareholder's account
that are not subject to a CDSC. The CDSC will be retained by the Principal
Underwriter. The CDSC is waived for redemptions involving certain liquidation,
merger or acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds in accordance with the conditions set
forth under "Eaton Vance Shareholder Services -- Reinvestment Privilege," the
shareholder's account will be credited with the amount of any CDSC paid on such
redeemed shares.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Funds' independent certified public accountants. Shortly
after the end of each calendar year, each Fund will furnish its shareholders
with information necessary for preparing federal and state tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
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 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 balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA, 01581-5123 (please provide the name of
the shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Funds'
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares 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 Authorized Firm 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 Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of a Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Exchange offers are available only in
States where shares of the fund being acquired may be legally sold.
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.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon the redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
The Transfer Agent 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 Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds advised or administered by Eaton Vance may be
exchanged for Fund shares on the basis of the net asset value per share of each
fund at the time of the exchange (plus, in the case of an exchange made within
six months of the date of purchase of shares subject to an initial sales charge,
an amount equal to the difference, if any, between the sales charge previously
paid on the shares being exchanged and the sales charge payable on the shares
being acquired). Any such exchange is subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent, provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Funds, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE 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, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund 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 Transfer Agent, First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any time
- -- whether or not distributions are reinvested. The name of the shareholder, the
Fund 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.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest at
net asset value any portion or all of the redemption proceeds (plus that amount
necessary to acquire a fractional share to round off the purchase to the nearest
full share) in shares of a Fund, or, provided that the shares redeemed have been
held for at least 60 days, in shares of any of the other funds offered by the
Principal Underwriter subject to an initial sales charge, provided that the
reinvestment is effected within 60 days after such redemption, and the privilege
has not been used more than once in the prior 12 months. Shares are sold to a
reinvesting shareholder at the next determined net asset value following timely
receipt of a written purchase order by the Principal Underwriter or by the fund
the shares of which are to be purchased (or by such fund's transfer agent). The
privilege is also available to shareholders of the funds listed under "The Eaton
Vance Exchange Privilege" who wish to reinvest such redemption proceeds in
shares of a Fund. If a shareholder reinvests redemption proceeds within the
60-day period the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of a Fund are
sold at a loss and the proceeds are reinvested in shares of the Fund (or other
shares of the Fund are acquired) within the period beginning 30 days before and
ending 30 days after the date of the redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO A FUND BY ITS
CORRESPONDING PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE
DECLARED DAILY AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF
DECLARATION. Such distributions, whether taken in cash or reinvested in
additional shares, will ordinarily be paid on the last day of each month or the
next business day thereafter. Each Fund anticipates that for tax purposes the
entire distribution, whether paid in cash or reinvested in additional shares,
will constitute tax-exempt income to shareholders, except for the proportionate
part of the distribution that may be considered taxable income if the Fund has
taxable income during the calendar year. Shareholders reinvesting the monthly
distribution should treat the amount of the entire distribution as the tax cost
basis of the additional shares acquired by reason of such reinvestment. Daily
distribution crediting will commence on the business day after collected funds
for the purchase of 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.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent a sales charge is
reduced or eliminated in a subsequent acquisition of shares of a Fund or of
another fund pursuant to a Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
Each Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gains) and net capital
gains that it distributes to shareholders. In satisfying these requirements,
each Fund will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, each Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios do not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time Fund shares have
been owned by the shareholder. If shares are purchased shortly before the record
date of such a distribution, the shareholder will pay the full price for the
shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether paid
in cash or reinvested in additional shares 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.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of a Fund is not deductible to the
extent it is deemed related to the Fund's distributions of tax-exempt interest
dividends to the shareholder. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
industrial development or private activity bonds may be subject to tax on a
portion of the Fund's distributions to them of exempt interest dividends.
Accordingly, such user 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 with their tax advisers concerning the applicability
of State, local and other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, EACH FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. Each Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. A taxable-equivalent yield is computed by using the tax-exempt
yield figure and dividing by one minus the tax rate. Each Fund's average annual
total return is determined by computing the average annual percentage change in
value of $1,000 invested at the maximum public offering price (which includes
the maximum sales charge) for specified periods, assuming reinvestment of all
distributions. Each Fund may publish annual and cumulative total return figures
from time to time. Each Fund may quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund sales charge.
The Funds may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on a Fund's net asset value per share would be lower if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of a Fund will fluctuate over
time, and any presentation of the Fund's yield or total return for any prior
period should not be considered a representation of what an investment may earn
or what the Fund's yield or total return may be in any future period. If the
expenses of a Fund or its corresponding Portfolio are allocated to 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 and Puerto Rico.
The bond ratings provided below are current as of the date of this Prospectus
and are based on economic conditions which may not continue; moreover, there can
be no assurance that particular bond issues may not be adversely affected by
changes in economic, political or other conditions. Unless stated otherwise, the
ratings indicated are for obligations of the State. A State's political
subdivisions may have different ratings which are unrelated to the ratings
assigned to State obligations.
CALIFORNIA. From the latter years of the 1980s through fiscal year 1992-1993,
California weathered a turbulent period of repeated budgetary imbalance. Even as
rapid population growth escalated the demand for government services, an
economic recession ravaged the State's revenue base and drove expenditures above
budget appropriations.
Bolstered by strengthening revenues, reduced caseload growth and an improving
economy, the State has begun to experience some relief from the serious
budgetary pressures that characterized a significant portion of the decade.
Reflecting the belief shared by many analysts that the California economy would
remain strong, the 1996-1997 Budget Act allocated a State budget of some $63
billion. In the context of optimistic revenue projections released by the
Department of Finance, the Budget Act granted a $230 million tax cut to
corporations while simultaneously providing an increase in funding for education
and prisons. However, only a relatively modest amount, $287 million, was
allocated to the reserve fund available for emergencies such as earthquakes.
Nonetheless, the State's budgetary fortunes continue to be subject to
unforeseeable events. In December, 1994, for example, Orange County, California
and its Investment Pool filed for bankruptcy. A plan of adjustment has been
approved by the court and became effective under which all non- municipal
creditors are to be paid in full. However, the ultimate financial impact on the
County and the State cannot be predicted with any certainty. In addition,
constant fluctuations in other factors affecting the State -- including health
and welfare caseloads, property tax receipts, federal funding and extraordinary
expenditures related to natural disasters -- will undoubtedly create new budget
challenges.
Furthermore, certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
adverse effects on the California economy. Among these are measures that have
established tax, spending or appropriations limits and prohibited the imposition
of certain new taxes, authorized the transfers of tax liabilities and
reallocations of tax receipts among governmental entities and provided for
minimum levels of funding.
Finally, certain bonds in the Portfolio may be subject to provisions of
California law that could adversely affect payments on those bonds or limit the
remedies available to bondholders. Among these are bonds of health care
institutions which are subject to the strict rules and limits regarding
reimbursement payments of California's Medi-Cal Program for health care services
to welfare beneficiaries, and bonds secured by liens on real property.
General obligation bonds of the State of California are currently rated A1 by
Moody's and A+ by S&P.
CALIFORNIA TAXES. California law provides that dividends paid by the California
Fund and designated by the California Fund as tax-exempt are exempt from
California personal income tax on individuals who reside in California to the
extent such dividends are derived from interest payments on municipal
obligations exempt from California State personal income taxes, provided that at
least 50% of the assets of the California Portfolio at the close of each quarter
of its taxable year are invested in obligations the interest on which is exempt
under either federal or California law from taxation by the State of California.
Distributions of short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains are treated as long-term capital gains
taxable at ordinary income rates under the California personal income tax.
CONNECTICUT. Historically, Connecticut's economic structure has been
concentrated in manufacturing, including a heavy component of defense-related
industries, which increases the State's vulnerability to economic cycles and to
declines in federal government defense spending. More recently, Connecticut's
level of manufacturing activity has declined, but this has been partially offset
by extensive urban development, a large insurance sector, relocations of
corporate headquarters to Connecticut (specifically to Fairfield County), and
the extension of other service sectors. For 1996, the unemployment rate in
Connecticut on a seasonally adjusted basis was 5.0%, as compared to a rate of
5.4% nationwide.
General obligation bonds issued by Connecticut municipalities are payable
primarily only from ad valorem taxes on property subject to taxation by the
municipality. The State has about $6 billion of general obligation bonds
outstanding, of which more than half have been issued for general state
purposes. The remaining general obligation bonds were issued for highway
construction, mass transit, and rental housing. Debt indications have been
rising and are high at $1,963 of net direct debt per capita. Certain Connecticut
municipalities have experienced severe fiscal difficulties and have reported
operating and accumulated deficits in recent years. Regional economic
difficulties, reductions in revenues, and increased expenses could lead to
further fiscal problems for the State and its political subdivisions,
authorities, and agencies. This could result in declines in the value of their
outstanding obligations, reductions in their ability to pay interest and
principal thereon, and increases in their future borrowing costs.
General obligations of the State of Connecticut are rated AA-, Aa and AA by S&P,
Moody's and Fitch, respectively.
CONNECTICUT TAXES. In the opinion of Day, Berry & Howard, special Connecticut
tax counsel to the Connecticut Fund, shareholders of the Connecticut Fund will
not be subject to the Connecticut personal income tax on the Connecticut taxable
income of individuals, trusts, and estates in the case of distributions received
from the Connecticut Fund to the extent that such distributions qualify as
exempt-interest dividends for federal income tax purposes and are derived from
interest on tax-exempt obligations issued by or on behalf of the State of
Connecticut and its political subdivisions or the authorities,
instrumentalities, or districts of any of them, or on tax-exempt obligations the
interest on which Connecticut is prohibited from taxing by federal law, e.g.,
tax-exempt obligations that are issued by the governments of Puerto Rico, the
U.S. Virgin Islands and Guam.
Other distributions from the Connecticut Fund, including dividends attributable
to obligations of issuers in other states and all long-term and short-term
capital gains, will not be exempt from the Connecticut personal income tax,
except that capital gain dividends derived from obligations issued by or on
behalf of the State of Connecticut or its political subdivisions or the
authorities, instrumentalities or districts of any of them will not be subject
to such tax. Distributions from the Connecticut Fund that constitute items of
tax preference for purposes of the federal alternative minimum tax will not be
subject to the net Connecticut minimum tax applicable to taxpayers subject to
the Connecticut personal income tax and required to pay the federal alternative
minimum tax, to the extent qualifying as exempt-interest dividends derived from
obligations issued by or on behalf of the State of Connecticut and its political
subdivisions or the authorities, instrumentalities, or districts of any of them,
or from obligations the interest on which Connecticut is prohibited from taxing
by federal law, but other distributions from the Fund could cause or increase
liability for the net Connecticut minimum tax. The Connecticut Fund will report
annually to its shareholders the percentage and source, on a state-by-state
basis, of interest income received by the Connecticut Fund on municipal bonds
during the preceding year.
Distributions from investment income and capital gains, including exempt-
interest dividends derived from interest that is exempt from Connecticut
personal income tax and federal income tax, will be subject to the Connecticut
Corporation Business Tax if received by a corporation subject to such tax,
except for any portion thereof other than amounts qualifying as exempt- interest
dividends or capital gain dividends for federal income tax purposes that might
qualify for the dividends-received deduction provided under that Connecticut
tax, and all such distributions may be subject to state and local taxes in
states other than Connecticut.
FLORIDA. Florida's financial operations are considerably different than most
other states as Florida does not impose an individual income tax. Specifically,
Florida's constitution prohibits the levy, under the authority of the State, of
an individual income tax upon the income of natural persons who are residents or
citizens of Florida in excess of amounts which may be credited against or
deducted from any similar tax levied by the United States or any other state.
Accordingly, a constitutional amendment would be necessary to impose a state
individual income tax in excess of the foregoing constitutional limitations. The
lack of an individual income tax exposes total State tax collections to
considerably more volatility than would otherwise be the case and, in the event
of an economic downswing, could effect the State's ability to pay principal and
interest in a timely manner.
The Florida Constitution and Statutes mandate that the State budget as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each State fiscal year (July 1 - June 30). Pursuant
to a constitutional amendment which was ratified by the voters on November 8,
1994, the rate of growth in state revenues in a given fiscal year is limited to
no more than the average annual growth rate in Florida personal income over the
previous five years (revenues collected in excess of the limitation are
generally deposited into the Budget Stabilization Fund).
Financial operations of the State of Florida covering all receipts and
expenditures are maintained through the use of four funds (the General Revenue
Fund, Trust Funds, the Working Capital Fund and the Budget Stabilization Fund).
The General Revenue Fund receives the majority of State tax revenues. The Trust
Funds consist of monies received by the State which under law or trust agreement
are segregated for a purpose authorized by law. Revenues in the General Revenue
Fund which are in excess of the amount needed to meet appropriations may be
transferred to the Working Capital Fund.
The State finished the 1996 fiscal year with a working capital reserve of $150.4
million and $260.8 million in the newly established budget stabilization
reserve. For fiscal year 1995-96, the estimated General Revenue plus Working
Capital and Budget Stabilization funds available totalled $15.4 billion, a 4.0%
increase over fiscal year 1994-95. For fiscal year 1996-97, the estimated
General Revenue plus Working Capital and Budget Stabilization funds available
are reported to be $16.6 billion, a 7.7% increase over fiscal year 1995-96. The
1997 budget incorporates a 4.9% increase in revenues. The Florida and United
States unemployment rates for 1995 were 5.5% and 5.6%, respectively. The
estimated Florida and United States unemployment rates for 1996 and 1997 are
reported to be 5.3% and 5.4%, respectively.
In 1993, the State constitution was amended to limit the annual growth in the
assessed valuation of residential property. This amendment may, over time,
constrain the growth in property taxes, a major revenue source for local
governments. While no immediate ratings implications are expected, the amendment
could have a negative impact on the financial performance of local governments
over time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
General obligations of Florida are rated Aa, AA and AA by Moody's, S&P and
Fitch, respectively. S&P presently regards the outlook for the State as stable.
FLORIDA TAXES. The Florida Department of Revenue has ruled that shares of a
Florida series fund owned by a Florida resident will be exempt from the Florida
Intangible Personal Property Tax so long as the fund's portfolio includes on
January 1 of each year only assets, such as Florida tax-exempt securities and
United States Government securities, that are exempt from the Florida Intangible
Personal Property Tax. Although the date of valuation is prescribed as the close
of business on the last business day of the previous calendar year, only the
assets held in the portfolio of the fund on January 1 are to be valued.
The Florida Portfolio will normally attempt to invest substantially all of its
assets in tax-exempt obligations of Florida, the United States, the Territories
or political subdivisions of the United States or Florida ("Florida
Obligations"), and it will strive to hold, on January 1 of each year, only
assets that are exempt from the Florida intangibles tax. Accordingly, the value
of the Florida Fund shares held by a shareholder should, under normal
circumstances, be exempt from the Florida intangibles tax.
MICHIGAN. Michigan has long had a large representation in and is dominated by
the automobile industry and related industries and tends to be more vulnerable
to economic cycles than other states and the nation as a whole. For January,
1997 Michigan's unemployment rate was 4.9%, as compared to the national rate of
5.4%. In March, 1994, Michigan voters approved changes to the tax system
resulting in, among other things, an increase in the sales tax rate, a reduction
in the income tax rate and the creation of a statewide property tax.
Michigan's general obligation debt is rated A1, AA and AA, by Moody's, S&P and
Fitch, respectively.
MICHIGAN TAXES. The Michigan Fund has received an opinion from Butzel Long,
special Michigan tax counsel to the Michigan Fund, to the effect that
shareholders of the Michigan Fund who are subject to the Michigan state income
tax, municipal income tax or single business tax will not be subject to such
taxes on their Michigan Fund dividends to the extent that such distributions are
exempt-interest dividends for federal income tax purposes and are attributable
to interest on obligations held by the Michigan Portfolio and allocated to the
Michigan Fund which is exempt from regular federal income tax and is exempt from
Michigan State and City income taxes, Michigan single business tax and in the
form of an investment exempt from the Michigan intangibles tax ("Michigan
tax-exempt obligations"). Other distributions with respect to shares of the
Michigan Fund including, but not limited to, long or short-term capital gains,
will be subject to the Michigan income tax or single business tax and may be
subject to the city income taxes imposed by certain Michigan cities. The opinion
also provides that shares of the Michigan Fund will be exempt from the Michigan
intangibles tax to the extent the Michigan Portfolio's assets consist of
Michigan tax-exempt obligations and any other securities or obligations that are
exempt from the Michigan intangibles tax. The Michigan intangibles tax is being
phased out; thus even if it applies to a portion of income from the Fund (for
instance, due to non-Michigan investments), it is now reduced, and will be
eliminated by 1998.
NEW JERSEY. Fiscal year 1996 ended with total revenues up 4.3% to $15.6 billion.
However, total spending increased to $16.3 billion. As of January 1, 1996, New
Jersey fulfilled Governor Whitman's promised personal income tax cut of 30%.
Even so, tax revenues were up in all categories with income tax receipts up by
4.3%. The higher spending level resulted in a decrease of total fund balances to
$880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue $2.8
billion of bonds to fund the state's pension liability. The plan would free up
$647 million of funds for the current year but has raised budgetary sleight-
of-hand concerns. Largely, however, the New Jersey economy has performed well,
growing faster than its Mid-Atlantic neighbors, though slower than the nation as
a whole.
New Jersey's general obligation debt is rated Aa1, AA+ and AA+ by Moody's, S&P
and Fitch, respectively.
NEW JERSEY TAXES. The New Jersey Fund intends to satisfy New Jersey's statutory
requirements for treatment as a "Qualified Investment Fund." The Fund has
obtained an opinion of its special tax counsel, Wilentz, Goldman & Spitzer,
P.A., that, provided the New Jersey Fund limits its investments to those
described in this Prospectus and otherwise satisfies such statutory
requirements, shareholders of the New Jersey Fund which are individuals, estates
or trusts will not be required to include in their New Jersey gross income
distributions from the New Jersey Fund that are attributable to interest or gain
realized by the New Jersey Fund from obligations the interest on which is exempt
from regular federal income tax and is exempt from New Jersey State personal
income tax or other obligations statutorily free from New Jersey taxation.
However, with regard to corporate shareholders, such counsel is also of the
opinion that distributions from the New Jersey Fund will not be excluded from
net income and shares of the New Jersey Fund will not be excluded from
investment capital in determining New Jersey corporation business (franchise)
and corporation income taxes for corporate shareholders.
NEW YORK. New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a comparatively small share of the
nation's farming and mining activity. However, as the result of a recession
ending in the first quarter of 1993, 560,000 jobs were lost statewide (down 6.7%
from peak employment in 1989). Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been hindered
during recent years by significant cutbacks in the computer, manufacturing,
utility, defense and banking industries. The State expects continued employment
growth in New York for 1997 though at a slower rate than 1996. Government
downsizing has also moderated these job gains. Entertainment and finance
inndustries have had strong growth, moderating those losses.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase of
tax revenues in the wake of tax reductions in 1996, with personal income tax
receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer taxes
and fees up 2.5%. Tax collections were particularly enhanced by the booming
financial sector. Growth in that sector is expected to slow in fiscal year 1998,
which could impact tax revenue growth. Government spending also declined by
0.9%, particularly capital spending and debt service.
The fiscal stability of New York State is related, at least in part, to the
fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State. In some cases, the State has had to
provide special assistance in recent years to enable such agencies, authorities
and localities to meet their financial obligations and, in some cases, to
prevent or cure defaults. To the extent State agencies and local governments
require State assistance to meet their financial obligations, the ability of the
State to meet its own obligations as they become due or to obtain additional
financing could be adversely affected.
New York's general obligations are rated A2, A- and A+ by Moody's, S&P and
Fitch, respectively. S&P currently assesses the rating outlook for New York
obligations as positive. As of June 3, 1997, New York City obligations were
rated Baa1, BBB+ and A- by Moody's, S&P and Fitch, respectively. On February 28,
1996, Fitch placed the City's general obligation bonds on Fitch Alert with
negative implications. On November 5, 1996, Fitch removed the City's general
obligation bonds from Fitch Alert, although Fitch stated that the outlook
remains negative.
NEW YORK TAXES. In the opinion of Brown & Wood LLP, under New York law,
dividends paid by the New York Fund are exempt from New York State and New York
City personal income tax applicable to individuals who reside in New York to the
extent such dividends are excluded from gross income for federal income tax
purposes and are derived from interest payments on tax-exempt obligations issued
by or on behalf of New York State and its political subdivisions and agencies,
or by the governments of Puerto Rico, the U.S. Virgin Islands and Guam. Other
distributions from the New York Fund, including distributions derived from
taxable ordinary income and net short-term and long-term capital gains, are
generally not exempt from New York State or City personal income tax.
OHIO. The State's economy is reliant in part on durable goods manufacturing,
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity in Ohio, as in many
other industrially developed states, tends to be more cyclical than in some
other states and in the nation as a whole. In fiscal 1993, a projected $520
million budget gap was addressed through tax revisions and appropriation cuts.
By the fiscal year 1996, the State had replenished its Budget Stabilization Fund
to a level of $828.3 million. Revenues continue to grow at a faster rate then
expenditures; 3.2% versus 2.2%. The State continues to maintain a solid
financial position.
General obligations of Ohio are rated AA+ and Aa1 by S&P and Moody's,
respectively (except that highway obligations are rated Aaa by S&P).
OHIO TAXES. In the opinion of special tax counsel to the Ohio Fund, Squire,
Sanders & Dempsey L.L.P., under Ohio law individuals who are otherwise subject
to the Ohio personal income tax will not be subject to such tax on dividends
paid by the Ohio Fund to the extent such dividends are properly attributable to
interest on obligations issued by or on behalf of the State of Ohio or its
political subdivisions, or the agencies or instrumentalities thereof ("Ohio
obligations"). Dividends paid by the Ohio Fund also will be excluded from the
net income base of the Ohio corporation franchise tax to the extent such
dividends are excluded from gross income for federal income tax purposes or are
properly attributable to interest on Ohio obligations. However, the Ohio Fund's
shares will be included in the tax base for purposes of computing the Ohio
corporation franchise tax on the net worth basis. These conclusions regarding
Ohio taxation are based on the assumption that the Ohio Fund will continue to
qualify as a regulated investment company under the Code and that at all times
at least 50% of the value of the total assets of the Ohio Fund will consist of
Ohio obligations or similar obligations of other states or their subdivisions
determined, to the extent the Ohio Fund invests in the Ohio Portfolio, by
treating the Ohio Fund as owning its proportionate share of the assets owned by
the Ohio Portfolio.
PUERTO RICO. The economy of Puerto Rico is dominated by the manufacturing and
service sectors. Although the economy of Puerto Rico expanded significantly from
fiscal 1984 through fiscal 1990, the rate of this expansion has slowed through
1996. Growth is dependent on the state of the U.S. economy and the relative
stability in the price of oil, the exchange rate of the U.S. dollar and the cost
of borrowing. Section 936 of the Internal Revenue Code (a tax incentive to U.S.
companies that has encouraged economic growth in Puerto Rico) will be phased out
by 2006. It is uncertain what affect the change will have on the Puerto Rican
economy. Although the Puerto Rico unemployment rate has declined substantially
since 1985, the seasonally adjusted unemployment rate for 1996 was approximately
13.8%. The North American Free Trade Agreement (NAFTA), which became effective
January 1, 1994, could lead to the loss of Puerto Rico's lower salaried or labor
intensive jobs to Mexico.
S&P rates Puerto Rico general obligations debt A, while Moody's rates it Baa1;
these ratings have been in place since 1956 and 1976, respectively. S&P's
outlook on Puerto Rico's rating was stable as of December 16, 1996.
<PAGE>
EV TRADITIONAL [GRAPHIC OMITTED]
LIMITED MATURITY
MUNICIPAL FUNDS
PROSPECTUS
AUGUST 1, 1997
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- -----------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-LC8/1P
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
LOGO
EV CLASSIC
NATIONAL LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------------------
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND (THE "FUND") IS A MUTUAL
FUND SEEKING TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION. THE FUND INVESTS ITS
ASSETS IN NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY INVESTING DIRECTLY IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. THE FUND IS A SERIES OF EATON VANCE INVESTMENT TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1997 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Fund. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Shareholder and Fund Expenses................ 2
The Fund's Financial Highlights.............. 3
The Fund's Investment Objective.............. 4
Investment Policies and Risks................ 4
Organization of the Fund and the Portfolio... 7
Management of the Fund and the Portfolio..... 9
Distribution Plan............................ 10
Valuing Fund Shares.......................... 11
<CAPTION>
PAGE
<S> <C>
How to Buy Fund Shares....................... 11
How to Redeem Fund Shares.................... 12
Reports to Shareholders...................... 13
The Lifetime Investing Account/Distribution
Options....................................... 14
The Eaton Vance Exchange Privilege........... 14
Eaton Vance Shareholder Services............. 15
Distributions and Taxes...................... 16
Performance Information...................... 17
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions during the First
Year
(as a percentage of redemption proceeds exclusive of all reinvestments and
capital
appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily
net assets)
-----------------------------------------------------------------------------------------
Investment Adviser Fee 0.48%
Rule 12b-1 Distribution (and Service) Fees 0.90
Other Expenses 0.69
-----
Total Operating Expenses 2.07%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a
contingent deferred sales charge in the case of redemption
during the first year after purchase) on a $1,000
investment, assuming (a) 5% annual return and (b)
redemption at the end of each period: $ 31 $65 $ 111 $240
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio" and "How to Redeem Fund Shares." A long-term shareholder in the Fund
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 Plan."
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through reinvestment of
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
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege." In the Example above, expenses would be $10 less in the
first year if there was no redemption.
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------
1997 1996 1995 1994**
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.570 $ 9.530 $ 9.550 $ 10.000
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.381 $ 0.379 $ 0.375 $ 0.104
Net realized and unrealized gain (loss) on investments (0.104) 0.039 0.026++ (0.421)
-------- -------- -------- --------
Total income (loss) from operations $ 0.277 $ 0.418 $ 0.401 $(0.317)
-------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.377) $(0.378) $(0.375) $(0.104)
In excess of net investment income(4) -- -- (0.046) (0.029)
-------- -------- -------- --------
Total distributions $(0.377) $(0.378) $(0.421) $(0.133)
-------- -------- -------- --------
NET ASSET VALUE, end of year $ 9.470 $ 9.570 $ 9.530 $ 9.550
======== ======== ======== ========
TOTAL RETURN(1) 2.95% 4.42% 4.35% (3.32)%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $ 9,215 $ 12,225 $ 19,930 $ 26,046
Ratio of net expenses to average daily net assets(2)(3) 2.07% 1.72% 1.57% 1.53%+
Ratio of net expenses to average daily net assets after
custodian fee reduction(2) 2.05% 1.71% -- --
Ratio of net investment income to average daily net assets 3.99% 3.95% 4.01% 3.10%+
*For the periods indicated, the operating expenses of the Fund reflect an allocation of expenses to the
Administrator. Had such actions not been taken, the ratios and net investment income per share would have been
as follows:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(3) 2.03% 1.81% 1.87%+
Expenses after custodian fee reduction(2) 2.02% -- --
Net investment income 3.64% 3.77% 2.76%+
NET INVESTMENT INCOME PER SHARE $ 0.349 $ 0.353 $ 0.093
======== ======== ========
** For the period from the start of business, December 8, 1993, to March 31, 1994.
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period
because of the timing of sales of Fund shares and the amount of per share realized and unrealized gains
and losses at such time.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is computed on a non-annualized
basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The expense ratios for the year ended March 31, 1996 and periods thereafter, have been adjusted to
reflect a change in reporting guidelines. The new reporting guidelines require the Fund to increase its
expense ratio by the effect of any expense offset arrangements with its service providers or those of
the Portfolio. The expense ratios for each of the prior periods have not been adjusted to reflect this
change.
(4) The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment
Companies. The SOP requires that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
3
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION.
The Fund currently seeks to meet its investment objective by investing its
assets in National Limited Maturity Municipals Portfolio (the "Portfolio"), a
separate registered investment company which has the same investment objective
and policies as the Fund. The Portfolio 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, are determined to be of at least investment
grade quality by the Investment Adviser.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of both
the Fund and the Portfolio and may not be changed unless authorized by a vote of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be.
At least 65% of the Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The Portfolio may invest up to 35% 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. Municipal
obligations rated Baa or BBB may have speculative characteristics. Also, changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case of
higher rated obligations. Securities rated below Baa or BBB are commonly known
as "junk bonds". The Portfolio may retain an obligation whose rating drops below
B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
In pursuing its investment objective, the 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, the 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.
The 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 the dollar weighted average
portfolio duration will not exceed nine years, the 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, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual appropriations by a state's legislature. Municipal notes include bond
anticipation, tax anticipation, and revenue anticipation notes.
4
<PAGE>
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.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
March 31, 1997, the Portfolio had 28.2% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations of
the same type, including without limitation the following: general obligations
of states and localities; lease rental obligations of state and local
authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; or industrial development or
pollution control bonds issued for electric utility systems, steel companies,
paper companies or other purposes. This may make the Portfolio more susceptible
to adverse economic, political, or regulatory occurrences affecting a particular
category of issuers. For example, health care-related issuers are susceptible to
medicaid reimbursement policies, and national and state health care legislation.
In addition, municipal obligations that rely on an annual appropriation of funds
by a state's legislature for payment are subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. As
the Portfolio's concentration in the securities of a particular category of
issuer increases, so does the potential for fluctuation in the value of the
Fund's shares.
Nevertheless, the Portfolio's classification under the Investment Company Act of
1940 (the "1940 Act") as a "diversified" investment company means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer (which is generally inapplicable because
municipal debt obligations are not voting securities).
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following other investment practices, some of
which may be considered to involve "derivative" instruments because they derive
their value from another instrument, security or index. In addition, the
Portfolio may temporarily borrow up to 5% of the value of its total assets to
satisfy redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-issued"
basis, which means that payment and delivery occur on a future settlement date.
The price and yield of such securities are generally fixed on the date of
commitment to purchase. However, the market value of the securities may
fluctuate prior to delivery and upon delivery the securities may be worth more
or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations), and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market
5
<PAGE>
price paid for insured obligations may reduce the Fund's current yield.
Insurance generally will be obtained from insurers with a claims-paying ability
rated Aaa by Moody's or AAA by S&P or Fitch. The insurance does not guarantee
the market value of the insured obligations or the net asset value of the Fund's
shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower) or are unrated. As indicated above, the
Portfolio may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
Municipal obligations rated investment grade or below and comparable unrated
municipal obligations in which the Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When the Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by the Portfolio which are rated below investment
grade but which, subsequent to the assignment of such rating, are backed by
escrow accounts containing U.S. Government obligations, may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. The Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by the Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Because the Portfolio intends to limit its average
portfolio duration to no more than nine years, the net asset value of the Fund
can be expected to be less sensitive to changes in interest rates than that of a
fund with a longer average portfolio duration. Changes in the credit quality of
the issuers of municipal obligations held by the Portfolio will affect the
principal value of (and possibly the income earned on) such obligations. In
addition, the values of such securities are affected by changes in general
economic conditions and business conditions affecting the specific industries of
their issuers. Changes by recognized rating services in their ratings of a
security and in the ability of the issuer to make payments of principal and
interest may also affect the value of the Portfolio's investments. The amount of
information about the financial condition of an issuer of municipal obligations
may not be as extensive as that made available by corporations whose securities
are publicly traded. An investment in shares of the Fund will not constitute a
complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to
6
<PAGE>
sell such securities only at prices lower than if such securities were more
widely held. Under such circumstances, it may also be more difficult to
determine the fair value of such securities for purposes of computing the
Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A
SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE
INVESTMENT OBJECTIVE AND POLICES OF THE FUND AND THE PORTFOLIO ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE
TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S
SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. The Trust may issue
an unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares." There are no annual meetings of shareholders,
but special meetings may be held as required by law to elect Trustees and
consider certain other matters. Shareholders are entitled to one vote for each
full share held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved restructuring
the Fund whereby the Fund will become the Class C shares of Eaton Vance National
Limited Maturity Municipals Fund. Other funds with the same investment objective
and policies that invest in the Portfolio will become Class A and Class B. It is
anticipated that this restructuring will reduce Fund operating expenses, thereby
enhancing long-term returns and improving operational flexibility. The
conversion to the multiple-class structure will not be a taxable transaction or
change the value or cost basis of existing shareholders' investments. Likewise,
the conversion will not materially change shareholder voting rights. It is
possible that some shareholders could, in the future,
7
<PAGE>
receive different distributions of realized capital gains that would be the case
if the restructuring did not occur. This result could occur because allocation
of the Portfolio's current unrealized capital gains will be different under
multiple-class accounting rules than has been the case under the partnership
accounting of the current structure. The actual realization of capital gains in
the future remains uncertain and depends not only on the Investment Adviser's
decisions but also on the fluctuating market valuation of specific securities.
Because capital gains distributions reduce the net asset value of a fund's
shares, the effect of such a distribution change is to alter current tax
obligations and tax obligations upon redemption (by the same amount).
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
8
<PAGE>
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<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%
</TABLE>
As at March 31, 1997, the Portfolio had net assets of $102,503,516. For the
fiscal year ended March 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.48% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Portfolio since
May 1, 1997. He has been a Vice President of Eaton Vance and BMR since January
1996 and has been an employee of Eaton Vance 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 Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Fund, the Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by the Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration
9
<PAGE>
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 Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the 1940 Act. UNDER THE PLAN, THE FUND PAYS THE PRINCIPAL UNDERWRITER A FEE,
ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT EXCEEDING .75% OF ITS
AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF FUND SHARES. The Plan
provides that the Fund may use such fees to compensate the Principal Underwriter
for sales commissions paid by it to financial services firms ("Authorized
Firms") on the sale of Fund shares and for interest expenses. The Principal
Underwriter currently expects to pay to an Authorized Firm (a) sales commissions
(except on exchange transactions and reinvestments) at the time of sale equal to
.75% of the purchase price of the shares sold by such Firm, and (b) monthly
sales commissions approximately equivalent to 1/12 of .75% of the value of
shares sold by such Firm and remaining outstanding for at least one year. During
the first year after a purchase of Fund shares, the Principal Underwriter will
retain the sales commission as reimbursement for the sales commissions made to
Authorized Firms at the time of sale. Contingent deferred sales charges paid to
the Principal Underwriter will be used to reduce amounts owed to it. Because
payments to the Principal Underwriter by the Fund are limited, uncovered
distribution charges (sales commissions paid by the Principal Underwriter plus
interest, less the above fees and contingent deferred sales charges received by
it) may exist indefinitely. During the fiscal year ended March 31, 1997, the
Fund paid or accrued fees under the Plan equivalent to .75% of the Fund's
average daily net assets. As of March 31, 1997, uncovered distribution charges
amounted to approximately $3,466,000 (equivalent to 37.6% of the Fund's net
assets). For more information, see "Distribution Plan" in the Statement of
Additional Information.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .15% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .15% of the value of shares sold by such
Firm and remaining outstanding for at least one year. However, the 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.
During the first year after a purchase of Fund shares, the Principal Underwriter
will retain the service fee as reimbursement for the service fee payment made to
Authorized Firms at the time of sale. For the fiscal year ended March 31, 1997,
the Fund paid or accrued service fees equivalent to .15% of the Fund's average
daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including (without limitation) the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of uncovered distribution charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund
10
<PAGE>
shares; however, the Fund is not contractually obligated to continue the Plan
for any particular period of time. Suspension of the offering of Fund shares
would not, of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
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.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of the Fund through
Authorized Firms at the net asset value per share of the Fund next determined
after an order is effective. An Authorized Firm may charge its customers a fee
in connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at 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 on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities, but does not guarantee the best available price. Eaton
Vance will absorb any transaction costs, such as commissions, on the sale of the
securities.
11
<PAGE>
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 Classic National Limited Maturity Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic National Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS - BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based
12
<PAGE>
upon the net asset value calculated after the Principal Underwriter, as the
Fund's agent, receives the order. It is the Authorized Firm's responsibility to
transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the 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
applicable contingent deferred sales charges (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first year of their
purchase (except shares acquired through the reinvestment of distributions)
generally will be subject to a contingent deferred sales charge ("CDSC") equal
to 1% of the net asset value of the redeemed shares. This CDSC is imposed on any
redemption, the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions, and (c) the increase, if any, of value in the other shares in
the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a CDSC.
That is, each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first-out basis. As described under "Distribution Plan", the CDSC will
be paid to the Principal Underwriter or the Fund.
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the purchase of Fund shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a distribution from a retirement
plan qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns.
13
<PAGE>
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Authorized Firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed subject to a CDSC (or equivalent early withdrawal
charge),
14
<PAGE>
on the basis of the net asset value per share of each fund at the time of the
exchange. Exchange offers are available only in states where shares of the fund
being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of 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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve-month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent 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 Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of Fund shares acquired in an exchange, 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.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and shares
of Eaton Vance Money Market Fund acquired as the result of an exchange from an
EV Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic National Limited Maturity Municipals Fund may be mailed directly to the
Transfer Agent, First Data Investor Services Group, P.O. Box 5123, Westborough,
MA 01581-5123 at any time -- whether or not distributions are reinvested. The
name of the shareholder, the Fund 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.
15
<PAGE>
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 CDSC. See "How to Redeem Fund Shares". A minimum deposit of
$5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption,
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares of the Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the redemption,
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the twenty-second day of each month or the next
business day thereafter. The Fund anticipates that for tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares of the
Fund, will constitute tax-exempt income to shareholders, except for the
proportionate part of the distribution that may be considered taxable income if
the Fund has taxable income during the calendar year. Shareholders reinvesting
the monthly distribution should treat the amount of the entire distribution as
the tax cost basis of the additional shares acquired by reason of such
reinvestment. Daily distribution crediting will commence on the business day
after collected funds for the purchase of Fund shares are available at the
Transfer Agent. Shareholders will receive timely federal income tax information
as to the tax-exempt or taxable status of all distributions made by the Fund
during the calendar year. The Fund's net realized capital gains, if any, consist
of the net realized capital gains allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers; the
Fund's net realized capital gains, if any, will be distributed at least once a
year, usually in December.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gain) and net capital gains
that it distributes to its shareholders. In satisfying these requirements, the
Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time Fund shares have
been owned by the shareholder. If shares are purchased shortly before the record
date of such a distribution, the shareholder will pay the full price for the
shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether paid
in cash or reinvested in additional shares of the Fund. Tax-exempt distributions
received from the Fund are includable in a shareholder's tax base for
determining the taxability of social security and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Fund is not deductible to the
extent it is deemed related to the Fund's distributions of tax-exempt interest
dividends to the shareholder.
16
<PAGE>
Further, entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development or private
activity bonds may be subject to tax on a portion of the Fund's distributions to
them of exempt interest dividends. Accordingly, such users should consult their
tax advisers before purchasing shares of the Fund. "Substantial user" is defined
in applicable Treasury regulations to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of industrial development bonds and would likely be interpreted to
include private activity bonds issued to finance similar facilities.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by one minus the tax rate. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods, assuming reinvestment of all
distributions. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any applicable CDSC at the end
of the period. The Fund may also publish annual and cumulative total return
figures from time to time. The Fund may quote total return for the period prior
to commencement of operations which would reflect the Portfolio's total return
(or that of its predecessor) adjusted to reflect any applicable Fund sales
charge.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
17
<PAGE>
[LOGO]
EATON VANCE
===========
Mutual Funds
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------------------
PROSPECTUS
AUGUST 1, 1997
EV CLASSIC
NATIONAL LIMITED MATURITY MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110 C-LNAP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
[LOGO]
EV MARATHON
NATIONAL LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------------------
EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND (THE "FUND") IS A MUTUAL
FUND SEEKING TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM REGULAR
FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION. THE FUND INVESTS ITS
ASSETS IN NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. THE FUND IS A SERIES OF EATON VANCE INVESTMENT TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1997 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Fund. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Shareholder and Fund Expenses................ 2
The Fund's Financial Highlights.............. 3
The Fund's Investment Objective.............. 4
Investment Policies and Risks................ 4
Organization of the Fund and the Portfolio... 7
Management of the Fund and the Portfolio..... 9
Distribution Plan............................ 10
Valuing Fund Shares.......................... 11
<CAPTION>
PAGE
<S> <C>
How to Buy Fund Shares....................... 11
How to Redeem Fund Shares.................... 12
Reports to Shareholders...................... 14
The Lifetime Investing Account/Distribution
Options.................................... 14
The Eaton Vance Exchange Privilege........... 15
Eaton Vance Shareholder Services............. 16
Distributions and Taxes...................... 16
Performance Information...................... 17
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
Redemptions during the First Five Years (as a percentage of redemption
proceeds exclusive of all reinvestments and capital appreciation in the
account) 3.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily
net assets)
-----------------------------------------------------------------------------------------
Investment Adviser Fee 0.48%
Rule 12b-1 Distribution (and Service) Fees 0.90
Other Expenses 0.31
-----
Total Operating Expenses 1.69%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
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: $ 47 $73 $83 $143
An investor would pay the following expenses on the
same investment, assuming (a) 5% annual return and (b)
no redemptions: $ 17 $53 $83 $143
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year. Class I
shares convert to Class II shares approximately four years after purchase,
therefore the Example for 5 years and 10 years reflects Class II expenses. See
"How to Buy Fund Shares -- Conversion Feature."
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio" and "How to Redeem Fund Shares." A long-term shareholder in the Fund
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 Plan."
No contingent deferred sales charge is imposed on (a) shares purchased more than
four years prior to redemption, (b) shares acquired through reinvestment of
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
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege."
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997
--------------------- YEAR ENDED MARCH 31,
CLASS ------------------------------------------
CLASS I II* 1996 1995 1994 1993**
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 10.170 $ 10.030 $ 10.130 $ 10.160 $ 10.450 $ 10.000
-------- -------- -------- -------- -------- ---------
INCOME FROM OPERATIONS:
Net investment income $ 0.428 $ 0.393 $ 0.413 $ 0.400 $ 0.406 $ 0.339
Net realized and unrealized gain (loss) on
investments (0.098) 0.033++ 0.040 0.033 (0.178) 0.573
-------- -------- -------- -------- -------- ---------
Total income from operations $ 0.330 $ 0.426 $ 0.453 $ 0.433 $ 0.228 $ 0.912
-------- -------- -------- -------- -------- ---------
LESS DISTRIBUTIONS:
From net investment income $ (0.430) $ (0.386) $ (0.413) $ (0.400) $ (0.406) $ (0.339)
In excess of net investment income(5) -- -- -- (0.058) (0.091) --
From net realized gain on investments -- -- -- (0.005) (0.021) (0.010)
From paid-in capital -- -- -- -- -- (0.113)
-------- -------- -------- -------- -------- ---------
Total distributions $ (0.430) $ (0.386) $ (0.413) $ (0.463) $ (0.518) $ (0.462)
-------- -------- -------- -------- -------- ---------
NET ASSET VALUE, end of year $ 10.070 $ 10.070 $ 10.170 $ 10.130 $ 10.160 $ 10.450
======== ======== ======== ======== ======== =========
TOTAL RETURN(1) 3.30% 4.06% 4.51% 4.43% 2.10% 9.05%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $ 48,692 $ 37,072 $112,027 $141,289 $151,787 $ 89,878
Ratio of net expenses to average daily net
assets(2)(4) 1.69% 0.99%+ 1.64% 1.57% 1.46% 1.50%+
Ratio of net expenses to average daily net
assets after custodian fee reduction(2) 1.67% 0.97%+ 1.63% -- -- --
Ratio of net investment income to average
daily net assets 4.37% 5.14%+ 4.04% 3.99% 3.78% 3.86%+
PORTFOLIO TURNOVER(3) -- -- -- -- -- 51%
* For the period indicated, the operating expenses of the Fund reflect a reduction of the investment adviser fee.
Had such action not been taken, the ratios and net investment income per share would have been as follows:
RATIOS (As a percentage of average daily net
assets):
Expenses(2)(4) 1.68%+
Net investment income 3.68%+
NET INVESTMENT INCOME PER SHARE $ 0.323
=========
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period
because of the timing of sales of Fund shares and the amount of the per share realized and unrealized
gains and losses at such time.
* For the period from the start of business, June 27, 1996, to March 31, 1997.
** For the period from the start of business, May 22, 1992, to March 31, 1993.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is computed on a non-annualized
basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The portfolio turnover rate for the period since the Fund
transferred substantially all of its investable assets to the Portfolio is shown in the Portfolio's
financial statements which are included in the Fund's annual report.
(4) The expense ratios for the year ended March 31, 1996 and periods thereafter, have been adjusted to
reflect a change in reporting guidelines. The new reporting guidelines require the Fund to increase its
expense ratio by the effect of any expense offset arrangements with its service providers or those of
the Portfolio. The expense ratios for each of the prior periods have not been adjusted to reflect this
change.
(5) The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment
Companies. The SOP requires that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
3
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION.
The Fund currently seeks to meet its investment objective by investing its
assets in National Limited Maturity Municipals Portfolio (the "Portfolio"), a
separate registered investment company which has the same investment objective
and policies as the Fund. The Portfolio 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, are determined to be of at least investment
grade quality by the Investment Adviser.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of both
the Fund and the Portfolio and may not be changed unless authorized by a vote of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be.
At least 65% of the Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The Portfolio may invest up to 35% 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. Municipal
obligations rated Baa or BBB may have speculative characteristics. Also, changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case of
higher rated obligations. Securities rated below Baa or BBB are commonly known
as "junk bonds". The Portfolio may retain an obligation whose rating drops below
B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
In pursuing its investment objective, the 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, the 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.
The 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 the dollar weighted average
portfolio duration will not exceed nine years, the 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, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual
4
<PAGE>
appropriations by a state's legislature. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
March 31, 1997, the Portfolio had 28.2% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations of
the same type, including without limitation the following: general obligations
of states and localities; lease rental obligations of state and local
authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; or industrial development or
pollution control bonds issued for electric utility systems, steel companies,
paper companies or other purposes. This may make the Portfolio more susceptible
to adverse economic, political, or regulatory occurrences affecting a particular
category of issuers. For example, health care-related issuers are susceptible to
medicaid reimbursement policies, and national and state health care legislation.
In addition, municipal obligations that rely on an annual appropriation of funds
by a state's legislature for payment are subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. As
the Portfolio's concentration in the securities of a particular category of
issuer increases, so does the potential for fluctuation in the value of the
Fund's shares.
Nevertheless, the Portfolio's classification under the Investment Company Act of
1940 (the "1940 Act") as a "diversified" investment company means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer (which generally is inapplicable because
municipal debt obligations are not voting securities).
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-issued"
basis, which means that payment and delivery occur on a future settlement date.
The price and yield of such securities are generally fixed on the date of
commitment to purchase. However, the market value of the securities may
fluctuate prior to delivery and upon delivery the securities may be worth more
or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of
5
<PAGE>
those securities. Although the insurance feature reduces certain financial
risks, the premiums for insurance and the higher market price paid for insured
obligations may reduce the Fund's current yield. Insurance generally will be
obtained from insurers with a claims-paying ability rated Aaa by Moody's or AAA
by S&P or Fitch. The insurance does not guarantee the market value of the
insured obligations or the net asset value of the Fund's shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower), or are unrated. As indicated above, the
Portfolio may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
Municipal obligations rated investment grade or below and comparable unrated
municipal obligations in which the Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When the Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by the Portfolio which are rated below investment
grade but which, subsequent to the assignment of such rating, are backed by
escrow accounts containing U.S. Government obligations, may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. The Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by the Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Because the Portfolio intends to limit its average
portfolio duration to no more than nine years, the net asset value of the Fund
can be expected to be less sensitive to changes in interest rates than that of a
fund with a longer average portfolio duration. Changes in the credit quality of
the issuers of municipal obligations held by the Portfolio will affect the
principal value of (and possibly the income earned on) such obligations. In
addition, the values of such securities are affected by changes in general
economic conditions and business conditions affecting the specific industries of
their issuers. Changes by recognized rating services in their ratings of a
security and in the ability of the issuer to make payments of principal and
interest may also affect the value of the Portfolio's investments. The amount of
information about the financial condition of an issuer of municipal obligations
may not be as extensive as that made available by corporations whose securities
are publicly traded. An investment in shares of the Fund will not constitute a
complete investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to
6
<PAGE>
sell such securities only at prices lower than if such securities were more
widely held. Under such circumstances, it may also be more difficult to
determine the fair value of such securities for purposes of computing the
Portfolio's net asset value.
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, a Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A
SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE
TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S
SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. The Trust may issue
an unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into two classes, Class I and Class II. Each Class
represents an interest in the Fund, but is subject to different expenses, rights
and privileges. See "Distribution Plan" and "How to Buy Fund Shares --
Conversion Feature". The Trustees have the authority under the Declaration of
Trust to create additional Classes of shares with rights and privileges
different from those applicable to the existing Classes of shares.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares." There are
no annual meetings of shareholders, but special meetings may be held as required
by law to elect Trustees and consider certain other matters. Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders of each
Class are entitled to share pro rata in the net assets attributable to the Class
available for distribution to shareholders.
7
<PAGE>
Effective March 31, 1998, the Trustees of the Trust have approved changing the
name of the Fund to Eaton Vance National Limited Maturity Municipals Fund and
restructuring the Fund's Class I shares to become Class B shares. The Fund's
Class II shares will become Class A. Other funds with the same investment
objective and policies that invest in the Portfolio will become Class A and
Class C. It is anticipated that this restructuring will reduce Fund operating
expenses, thereby enhancing long-term returns and improving operational
flexibility. The conversion to the multiple-class structure will not be a
taxable transaction or change the value or cost basis of existing shareholders'
investments. Likewise, the conversion will not materially change shareholder
voting rights. It is possible that some shareholders could, in the future,
receive different distributions of realized capital gains than would be the case
if the restructuring did not occur. This result could occur because allocation
of the Portfolio's current unrealized capital gains will be different under
multiple-class accounting rules than has been the case under the partnership
accounting of the current structure. The actual realization of capital gains in
the future remains uncertain and depends not only on the Investment Adviser's
decisions but also on the fluctuating market valuation of specific securities.
Because capital gains distributions reduce the net asset value of a fund's
shares, the effect of such a distribution change is to alter current tax
obligations and tax obligations upon redemption (by the same amount).
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
8
<PAGE>
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<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%
</TABLE>
As at March 31, 1997, the Portfolio had net assets of $102,503,516. For the
fiscal year ended March 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.48% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Portfolio since
May 1, 1997. He has been a Vice President of Eaton Vance and BMR since January
1996 and has been an employee of Eaton Vance 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 Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Fund, the Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by the Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
9
<PAGE>
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the 1940 Act. UNDER THE PLAN, THE FUND PAYS THE PRINCIPAL UNDERWRITER A FEE,
ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT EXCEEDING .75% OF ITS
AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO CLASS I SHARES. The Plan provides that
the Fund may use such fees to compensate the Principal Underwriter for sales
commissions paid by it to financial services firms ("Authorized Firms") on the
sale of Class I shares and for interest expenses. The Principal Underwriter uses
its own funds to pay sales commissions (except on exchange transactions and
reinvestments) to Authorized Firms at the time of sale equal to 2.5% of the
purchase price of the Class I shares sold by such Firms. Contingent deferred
sales charges paid to the Principal Underwriter will be used to reduce amounts
owed to it. Because payments to the Principal Underwriter by the Fund are
limited, uncovered distribution charges (sales commissions paid by the Principal
Underwriter plus interest, less the above fees and contingent deferred sales
charges received by it) may exist indefinitely. During the fiscal year ended
March 31, 1997, the Fund paid fees under the Plan equivalent to .75% of the
Fund's average daily net assets attributable to Class I shares for such year. As
of March 31, 1997, uncovered distribution charges amounted to approximately
$542,000 (equivalent to 1.1% of the Fund's Class I net assets). For more
information, see "Distribution Plan" in the Statement of Additional Information.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO ALL
CLASSES OF SHARES FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER
ACCOUNTS. The Trustees of the Trust have initially implemented this provision of
the 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% per annum of the Fund's average daily net assets attributable to both Class
I and Class II shares for any fiscal year based on the value of Fund shares sold
by such persons and remaining outstanding for at least twelve months. However,
the 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. For the fiscal year
ended March 31, 1997, the Fund made service fee payments equivalent to .15% of
the Fund's average daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Class I shares of the Fund and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of Class I shares. In addition,
the Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The 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 Fund's management intends to consider all relevant
factors, including (without limitation) the size of the 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. The 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, the Fund is not contractually obligated to continue
the 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.
10
<PAGE>
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
The net asset value of each Class is computed by dividing the value of the
Fund's assets attributable to that Class, less the liabilities attributable to
that Class, by the number of outstanding Class shares. Because the Fund invests
its assets in an interest in the Portfolio, the Fund's net asset value will
reflect the value of its interest in the Portfolio (which, in turn, reflects the
underlying value of the Portfolio's assets and liabilities).
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.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
CLASS I SHARES of the Fund may be purchased for cash or may be acquired in
exchange for acceptable securities. Investors may purchase Class I shares of the
Fund through Authorized Firms at the net asset value per Class I share of the
Fund next determined after an order is effective. An Authorized Firm may charge
its customers a fee in connection with transactions executed by that Firm. The
Fund may suspend the offering of shares at any time and may refuse an order for
the purchase of shares.
An initial investment in Class I shares of the Fund must be at least $1,000.
Once an account has been established the investor may send investments of $50 or
more at any time directly to the Fund's transfer agent (the "Transfer Agent") as
follows: First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123. The $1,000 minimum initial investment is waived for Bank Automated
Investing accounts, which may be established with an investment of $50 or more.
See "Eaton Vance Shareholder Services".
CONVERSION FEATURE. Class I shares held for the longer of (i) four years or (ii)
the time at which the contingent deferred sales charge applicable to such shares
expires (the "holding period") will automatically convert to Class II shares.
Such conversion will occur on or about the eighteenth day of the month in which
the holding period expires. For purposes of this conversion, all distributions
paid on Class I shares which the shareholder elects to reinvest in Class I
shares will be considered to be held in a separate sub-account. Upon the
conversion of Class I shares not acquired through the reinvestment of
distributions, a pro rata portion of the Class I shares held in the sub-account
will also convert to Class II shares. This portion will be determined by the
ratio that the Class I shares being converted bear to the total of Class I
shares (excluding shares acquired through reinvestment) in the account. This
conversion feature is subject to the continuing availability of a ruling from
the Internal Revenue Service or an opinion of counsel that the conversion is not
taxable for federal income tax purposes.
CLASS II SHARES are issued only in connection with the conversion feature
described above. The Trustees of the Trust may, however, offer Class II shares
in the future to limited classes of investors to be identified in the Fund's
prospectus.
11
<PAGE>
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 on the day of their receipt 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 Class I share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon National Limited Maturity Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon National Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS - BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares
12
<PAGE>
held by corporations, trusts or certain other entities, or subject to fiduciary
arrangements, may not be redeemed by telephone. Neither the Fund, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
redemption instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated by telephone are genuine
have been followed. Telephone instructions will be tape recorded. In times of
drastic economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the 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
applicable contingent deferred sales charges (described below) imposed on Class
I shares and any federal income tax required to be withheld. Although the Fund
normally expects to make payment in cash for redeemed shares, the Trust, subject
to compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund from
the Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions of Class I shares.
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
("CDSC"). This CDSC 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 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 CDSC. That is,
each redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. Any CDSC which is required to be imposed on share redemptions will be
made in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
------------------------------------------------------------
<S> <C>
First................................ 3.0%
Second............................... 2.5%
Third................................ 2.0%
Fourth............................... 1.0%
Fifth and following.................. 0.0%
</TABLE>
13
<PAGE>
In calculating the CDSC upon the redemption of Class I shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of Class I shares acquired in the exchange is deemed
to have occurred at the time of the original purchase of the exchanged shares.
Unless a shareholder specifies otherwise, redemption requests placed by
shareholders who own both Class I and Class II shares will be satisfied first by
redeeming Class I shares that are no longer subject to a CDSC, then by redeeming
Class II shares. If the Class II shares were acquired as the result of a
conversion of certificated Class I shares, the certificate must be returned to
the Transfer Agent before a redemption of such Class II shares can be processed.
No CDSC will be imposed on Class II shares of the Fund. No CDSC will be imposed
on Fund shares which have been sold to Eaton Vance or its affiliates, or to
their respective employees or clients. The CDSC applicable to Class I shares
will also be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see
"Eaton Vance Shareholder Services"), (2) as part of a required distribution from
a tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance and Class of shares owned. The
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 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
Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares 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 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
14
<PAGE>
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 the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Authorized Firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund) or Eaton Vance Money Market Fund, which
are subject to a CDSC. Shares of the Fund may also be exchanged for shares of
Eaton Vance Prime Rate Reserves, which are subject to an early withdrawal
charge, and shares of a money market fund sponsored by an Authorized Firm and
approved by the Principal Underwriter (an "Authorized Firm fund"). Any such
exchange will be made on the basis of the net asset value per share of each fund
at the time of the exchange. Exchange offers are available only in states where
shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of 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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent 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 Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC or early withdrawal charge schedule applicable to
Eaton Vance Prime Rate Reserves and Class I shares of any EV Marathon Limited
Maturity Fund, see "How to Redeem Fund Shares". The CDSC schedule applicable to
the other funds in the Eaton Vance Marathon Group of Funds is 5%, 5%, 4%, 3%, 2%
or 1% in the event of a redemption occurring in the first, second, third,
fourth, fifth or sixth year, respectively, after the original share purchase.
15
<PAGE>
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund. Shares of such Funds may be so exchanged for Class
II shares if the shares to be exchanged were acquired as the result of an
exchange of Class II shares.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable
gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon National Limited Maturity Municipals Fund may be mailed directly to the
Transfer Agent, First Data Investor Services Group, P.O. Box 5123, Westborough,
MA 01581-5123 at any time -- whether or not distributions 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 CDSC. See "How to Redeem Fund Shares". A minimum deposit of
$5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed Class I shares may
reinvest, with credit for any CDSC paid on the redeemed Class I shares, any
portion or all of the redemption proceeds (plus that amount necessary to acquire
a fractional share to round off the purchase to the nearest full share) in Class
I shares of the Fund, provided that the reinvestment is effected within 60 days
after such redemption and the privilege has not been used more than once in the
prior 12 months. 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 the Fund (or by the Fund's Transfer
Agent). To the extent that any Class I shares 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 the period beginning 30 days before and ending
30 days after the date of the redemption, some or all of the loss generally will
not be allowed as a tax deduction. Shareholders should consult their tax
advisers concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the fifteenth day of each month or the next business
day thereafter. The
16
<PAGE>
Fund anticipates that for tax purposes the entire distribution, whether paid in
cash or reinvested in 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. Shareholders reinvesting the monthly
distribution should 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 business day after collected
funds for the purchase of Fund shares are available at the Transfer Agent.
Shareholders will receive timely federal income tax information as to the tax-
exempt or taxable status of all distributions made by the Fund during the
calendar year. The Fund's net realized capital gains, if any, consist of the net
realized capital gains allocated to the Fund by the Portfolio for tax purposes,
after taking into account any available capital loss carryovers; the Fund's net
realized capital gains, if any, will be distributed at least once a year,
usually in December.
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code") and to satisfy all requirements
necessary to avoid paying federal income taxes on the part of its investment
company taxable income (consisting generally of net investment income and net
short-term capital gain) and net capital gains that it distributes to its
shareholders. In satisfying these requirements, the Fund will treat itself as
owning its proportionate share of each of the Portfolio's assets and as entitled
to the income of the Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time Fund shares have
been owned by the shareholder. If shares are purchased shortly before the record
date of such a distribution, the shareholder will pay the full price for the
shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether paid
in cash or reinvested in additional shares of the Fund. Tax-exempt distributions
received from the Fund are includable in a shareholder's tax base for
determining the taxability of social security and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Fund is not deductible to the
extent it is deemed related to the Fund's distributions of tax-exempt interest
dividends to the shareholder. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
industrial development or private activity bonds may be subject to tax on a
portion of the Fund's distributions to them of exempt interest dividends.
Accordingly, such users should consult their tax advisers before purchasing
shares of the Fund. "Substantial user" is defined in applicable Treasury
regulations to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of industrial
development bonds and would likely be interpreted to include private activity
bonds issued to finance similar facilities.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE THE YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN OF CLASS I SHARES. The current yield of the Fund's Class I shares is
calculated by dividing the net investment income per share earned during a
recent 30-day period by the maximum offering price per share (net asset value)
on the last day of the period and annualizing the resulting figure. A taxable-
equivalent yield is computed by using the tax-exempt yield figure and dividing
by one minus the tax rate. The Fund's average
17
<PAGE>
annual total return of the Fund's 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,
assuming reinvestment of all distributions. The average annual total return
calculation assumes a complete redemption of the investment and the deduction of
any applicable CDSC for Class I shares at the end of the period. The Fund may
also publish annual and cumulative total return figures for Class I shares from
time to time.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered a representation of what an investment may
earn or what the Fund's yield or total return may be in any future period.
18
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
EATON VANCE
===========
Mutual Funds
- --------------------------------------------------------------------------------
EV MARATHON
NATIONAL LIMITED MATURITY
MUNICIPALS FUND
PROSPECTUS
AUGUST 1, 1997
EV MARATHON NATIONAL LIMITED MATURITY
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110 M-LNAP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
LOGO
EV TRADITIONAL
NATIONAL LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------------------
EV TRADITIONAL NATIONAL LIMITED MATURITY MUNICIPALS FUND (THE "FUND") IS A
MUTUAL FUND SEEKING TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM
REGULAR FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION. THE FUND
INVESTS ITS ASSETS IN NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE FUND IS A SERIES OF EATON VANCE
INVESTMENT TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1997 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc., (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Fund. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Shareholder and Fund Expenses................ 2
The Fund's Financial Highlights.............. 3
The Fund's Investment Objective.............. 4
Investment Policies and Risks................ 4
Organization of the Fund and the Portfolio... 7
Management of the Fund and the Portfolio..... 8
Service Plan................................. 10
Valuing Fund Shares.......................... 10
<CAPTION>
PAGE
<S> <C>
How to Buy Fund Shares....................... 10
How to Redeem Fund Shares.................... 13
Reports to Shareholders...................... 14
The Lifetime Investing Account/Distribution
Options....................................... 14
The Eaton Vance Exchange Privilege........... 15
Eaton Vance Shareholder Services............. 16
Distributions and Taxes...................... 17
Performance Information...................... 18
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 2.25%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily
net assets)
-----------------------------------------------------------------------------------------
Investment Adviser Fee 0.48%
Other Expenses (including Service Plan Fees and after expense allocation) 0.59
-----
Total Operating Expenses (after expense allocation) 1.07%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following maximum initial
sales charge and expenses on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the
end of each period: $ 33 $55 $80 $150
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year. Absent an
allocation of expenses to the Administrator, Other Expenses would have been
0.83% and Total Operating Expenses would have been 1.31%.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio" and "Service Plan."
No sales charge is payable at the time of purchase on investments of $1 million
or more. However, a contingent deferred sales charge of 0.50% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. See "How to Buy Fund Shares" and "How to Redeem Fund Shares."
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995**
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.960 $ 9.930 $10.000
------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.492 $ 0.492 $ 0.402
Net realized and unrealized gain (loss) on investments (0.100) 0.029 (0.066)++
------- ------- -------
Total income from operations $ 0.392 $ 0.521 $ 0.336
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.490) $(0.491) $(0.402)
In excess of net investment income(4) -- -- (0.004)
From net realized gain on investments (0.112) -- --
------- ------- -------
Total distributions $(0.602) $(0.491) $(0.406)
------- ------- -------
NET ASSET VALUE, end of year $ 9.750 $ 9.960 $ 9.930
======== ======== ========
TOTAL RETURN(1) 4.02% 5.31% 3.48%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year (000 omitted) $ 7,241 $10,003 $ 7,795
Ratio of net expenses to average daily net assets(2)(3) 1.07% 0.75% 0.58%+
Ratio of net expenses to average daily net assets after custodian fee
reduction(2) 1.05% 0.74% --
Ratio of net investment income to average daily net assets 4.98% 4.88% 4.68%+
*For the periods indicated, the operating expenses of the Fund reflect an allocation of expenses to the
Administrator. Had such action not been taken, the ratios and net investment income per share would have
been as follows:
RATIOS (As a percentage of average daily net assets):
Expenses(2)(3) 1.31% 1.34% 2.79%+
Expenses after custodian fee reduction(2) 1.29% 1.33% --
Net investment income 4.75% 4.29% 2.47%+
NET INVESTMENT INCOME PER SHARE $ 0.469 $ 0.432 $ 0.212
======== ======== ========
** For the period from the start of business, June 3, 1994, to March 31, 1995.
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period
because of the timing of sales of Fund shares and the amount of per share realized and unrealized gains
and losses at such time.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is computed on a non-annualized
basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The annualized expense ratios for the year ended March 31, 1996 and periods thereafter, have been
adjusted to reflect a change in reporting guidelines. The new reporting guidelines require the Fund to
increase its expense ratio by the effect of any expense offset arrangements with its service providers
or those of the Portfolio. The expense ratios for each of the prior periods have not been adjusted to
reflect this change.
(4) The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment
Companies. The SOP requires that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
3
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE (1) A HIGH LEVEL OF CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX AND (2) LIMITED PRINCIPAL FLUCTUATION.
The Fund currently seeks to meet its investment objective by investing its
assets in National Limited Maturity Municipals Portfolio (the "Portfolio"), a
separate registered investment company which has the same investment objective
and policies as the Fund. The Portfolio 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 at least investment
grade quality by the Investment Adviser.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING EITHER DIRECTLY
OR INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY PRIMARILY
(I.E., AT LEAST 80% OF ITS NET ASSETS DURING PERIODS OF NORMAL MARKET
CONDITIONS) IN MUNICIPAL OBLIGATIONS, THE INTEREST ON WHICH IS EXEMPT FROM
REGULAR FEDERAL INCOME TAX. The foregoing policy is a fundamental policy of both
the Fund and the Portfolio, and may not be changed unless authorized by a vote
of the shareholders of the Fund or the investors in the Portfolio, as the case
may be.
At least 65% of the Portfolio's net assets will normally be invested in
obligations rated at least investment grade at the time of investment (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB
or higher by either Standard & Poor's Ratings Group ("S&P") or Fitch Investors
Service, Inc. ("Fitch")) or, if unrated, determined by the Investment Adviser to
be of at least investment grade quality. The Portfolio may invest up to 35% 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. Municipal
obligations rated Baa or BBB may have speculative characteristics. Also, changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case of
higher rated obligations. Securities rated below Baa or BBB are commonly known
as "junk bonds". The Portfolio may retain an obligation whose rating drops below
B after its acquisition if such retention is considered desirable by the
Investment Adviser. See "Additional Risk Considerations." For a description of
municipal obligation ratings, see the Statement of Additional Information.
In pursuing its investment objective, the 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, the 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.
The 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 the dollar weighted average
portfolio duration will not exceed nine years, the 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, the interest on which is, in the opinion of bond counsel, exempt from
regular federal income tax. Public purpose municipal bonds include general
obligation and revenue bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility or from the proceeds of a specific revenue source. Some
revenue bonds are payable solely or partly from funds which are subject to
annual
4
<PAGE>
appropriations by a state's legislature. Municipal notes include bond
anticipation, tax anticipation and revenue anticipation notes. Bond, tax and
revenue anticipation notes are short-term obligations that will be retired with
the proceeds of an anticipated bond issue, tax revenue or facility revenue,
respectively.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT") for individual investors. As at
March 31, 1997, the Portfolio had 28.2% of its net assets invested in such
obligations. Distributions to corporate investors of certain interest income may
also be subject to the AMT. The Fund may not be suitable for investors subject
to the AMT.
CONCENTRATION. The Portfolio may invest 25% or more of its assets in municipal
obligations of issuers located in the same state or in municipal obligations of
the same type, including without limitation the following: general obligations
of states and localities; lease rental obligations of state and local
authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities, municipal utilities systems or public housing authorities;
obligations of hospitals or life care facilities; or industrial development or
pollution control bonds issued for electric utility systems, steel companies,
paper companies or other purposes. This may make the Portfolio more susceptible
to adverse economic, political, or regulatory occurrences affecting a particular
category of issuers. For example, health care-related issuers are susceptible to
medicaid reimbursement policies, and national and state health care legislation.
In addition, municipal obligations that rely on an annual appropriation of funds
by a state's legislature for payment are subject to the risk that the
legislature will not appropriate the necessary amounts or take other action
needed to permit the issuer of such obligations to make required payments. As
the Portfolio's concentration in the securities of a particular category of
issuer increases, so does the potential for fluctuation in the value of the
Fund's shares.
Nevertheless, the Portfolio's classification under the Investment Company Act of
1940 (the "1940 Act") as a "diversified" investment company means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than 5%
of its total assets in the securities of any one issuer (except U.S. Government
obligations) and (2) the Portfolio may not own more than 10% of the outstanding
voting securities of any one issuer (which is generally inapplicable because
municipal debt obligations are not voting securities).
OTHER INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices, some of which
may be considered to involve "derivative" instruments because they derive their
value from another instrument, security or index. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
WHEN-ISSUED SECURITIES. The Portfolio may purchase securities on a "when-issued"
basis, which means that payment and delivery occur on a future settlement date.
The price and yield of such securities are generally fixed on the date of
commitment to purchase. However, the market value of the securities may
fluctuate prior to delivery and upon delivery the securities may be worth more
or less than the Portfolio agreed to pay for them. The Portfolio may also
purchase instruments that give the Portfolio the option to purchase a municipal
obligation when and if issued.
FUTURES TRANSACTIONS. The Portfolio may purchase and sell various kinds of
financial futures contracts and options thereon to hedge against changes in
interest rates. Futures contracts may be based on various debt securities (such
as U.S. Government securities and municipal obligations) and securities indices
(such as the Municipal Bond Index traded on the Chicago Board of Trade). Such
transactions involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell futures
contracts or related options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of margin deposits and premiums
paid on the Portfolio's outstanding positions would exceed 5% of the market
value of the Portfolio's net assets. These transactions involve transaction
costs. There can be no assurance that the Investment Adviser's use of futures
will be advantageous to the Portfolio. Distributions by the Fund of any gains
realized on the Portfolio's transactions in futures and options on futures will
be taxable.
INSURED OBLIGATIONS. The Portfolio may purchase municipal bonds that are
additionally secured by insurance, bank credit agreements, or escrow accounts.
The credit quality of companies which provide such credit enhancements will
affect the value of those securities. Although the insurance feature reduces
certain financial risks, the premiums for insurance and the higher market
5
<PAGE>
price paid for insured obligations may reduce the Fund's current yield.
Insurance generally will be obtained from insurers with a claims-paying ability
rated Aaa by Moody's or AAA by S&P or Fitch. The insurance does not guarantee
the market value of the insured obligations or the net asset value of the Fund's
shares.
ADDITIONAL RISK CONSIDERATIONS
Many municipal obligations offering high current income are rated investment
grade or below (Baa or BBB or lower), or are unrated. As indicated above, the
Portfolio may invest in municipal obligations rated below investment grade (but
not lower than B by Moody's, S&P or Fitch) and comparable unrated obligations.
Municipal obligations rated investment grade or below and comparable unrated
municipal obligations in which the Portfolio may invest will have speculative
characteristics in varying degrees. While such obligations may have some quality
and protective characteristics, these characteristics can be expected to be
offset or outweighed by uncertainties or major risk exposures to adverse
conditions. Lower rated and comparable unrated municipal obligations are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Lower rated or unrated municipal obligations are also more likely to
react to real or perceived developments affecting market and credit risk than
are more highly rated obligations, which react primarily to movements in the
general level of interest rates. The Investment Adviser seeks to minimize the
risks of investing in below investment grade securities through professional
investment analysis and attention to current developments in interest rates and
economic conditions. When the Portfolio invests in lower rated or unrated
municipal obligations, the achievement of the Portfolio's goals is more
dependent on the Investment Adviser's ability than would be the case if the
Portfolio were investing in municipal obligations in the higher rating
categories.
Municipal obligations held by the Portfolio which are rated below investment
grade but which, subsequent to the assignment of such rating, are backed by
escrow accounts containing U.S. Government obligations may be determined by the
Investment Adviser to be of investment grade quality for purposes of the
Portfolio's investment policies. The Portfolio may retain in its portfolio an
obligation whose rating drops below B after its acquisition, including defaulted
obligations, if such retention is considered desirable by the Investment
Adviser; provided, however, that holdings of obligations rated below Baa or BBB
will be less than 35% of net assets. In the event the rating of an obligation
held by a Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems necessary in
order to comply with the Portfolio's credit quality limitations. In the case of
a defaulted obligation, the Portfolio may incur additional expense seeking
recovery of its investment.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities held by the Portfolio can be expected to rise. Conversely, when
interest rates rise, the value of most portfolio security holdings can be
expected to decline. Because the Portfolio intends to limit its average
portfolio duration to no more than nine years, the net asset value of the Fund
can be expected to be less sensitive to changes in interest rates than that of a
fund with a longer average portfolio duration. Changes in the credit quality of
issuers of municipal obligations held by the Portfolio will affect the principal
value of (and possibly the income earned on) such obligations. In addition, the
values of such securities are affected by changes in general economic conditions
and business conditions affecting the specific industries of their issuers.
Changes by recognized rating services in their ratings of a security and in the
ability of the issuer to make payments of principal and interest may also affect
the value of the Portfolio's investments. The amount of information about the
financial condition of an issuer of municipal obligations may not be as
extensive as that made available by corporations whose securities are publicly
traded. An investment in shares of the Fund will not constitute a complete
investment program.
At times, a substantial portion of the Portfolio's assets may be invested in
securities as to which the Portfolio, by itself or together with other accounts
managed by the Investment Adviser and its affiliates, holds a major portion or
all of such securities. Under adverse market or economic conditions or in the
event of adverse changes in the financial condition of the issuer, the Portfolio
could find it more difficult to sell such securities when the Investment Adviser
believes it advisable to do so or may be able to sell such securities only at
prices lower than if such securities were more widely held. Under such
circumstances, it may also be more difficult to determine the fair value of such
securities for purposes of computing the Portfolio's net asset value.
6
<PAGE>
The secondary market for some municipal obligations (including issues which are
privately placed with the Portfolio) is less liquid than that for taxable debt
obligations or other more widely traded municipal obligations. The Portfolio
will not invest in illiquid securities if more than 15% of its net assets would
be invested in securities that are not readily marketable. No established resale
market exists for certain of the municipal obligations in which the Portfolio
may invest. The market for obligations rated below investment grade is also
likely to be less liquid than the market for higher rated obligations. As a
result, the Portfolio may be unable to dispose of these municipal obligations at
times when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at its option to
"call," or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed.
Some of the securities in which the Portfolio invests may include so-called
"zero-coupon" bonds, whose values are subject to greater fluctuation in response
to changes in market interest rates than bonds which pay interest currently.
Zero-coupon bonds are issued at a significant discount from face value and pay
interest only at maturity rather than at intervals during the life of the
security. The Portfolio is required to accrue income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in cash,
and the Fund is required to distribute its share of the Portfolio's income for
each taxable year. Thus, the Portfolio may have to sell other investments to
obtain cash needed to make income distributions.
The Portfolio may invest in municipal leases, and participations in municipal
leases. The obligation of the issuer to meet its obligations under such leases
is often subject to the appropriation by the appropriate legislative body, on an
annual or other basis, of funds for the payment of the obligations. Investments
in municipal leases are thus subject to the risk that the legislative body will
not make the necessary appropriation and the issuer will not otherwise be
willing or able to meet its obligation.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A
SHAREHOLDER VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH
ENUMERATED RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT
FUNDAMENTAL POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE
TRUST AND THE PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S
SHAREHOLDERS OR THE INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE INVESTMENT TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED OCTOBER 23, 1985, AS AMENDED. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. The Trust may issue
an unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares." There are no annual meetings of shareholders,
but special meetings may be held as required by law to elect Trustees and
consider certain other matters. Shareholders are entitled to one vote for each
full share held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved restructuring
the Fund whereby the Fund will become the Class A shares of Eaton Vance National
Limited Maturity Municipals Fund. Other funds with the same investment objective
and policies that invest in the Portfolio will become Class B and Class C. It is
anticipated that this restructuring will reduce Fund operating expenses, thereby
enhancing long-term returns and improving operational flexibility. The
conversion to the multiple-class structure will not be a taxable transaction or
change the value or cost basis of existing shareholders' investments. Likewise,
the conversion will not materially change shareholder voting rights. It is
possible that some shareholders could, in the future, receive different
distributions of realized capital gains that would be the case if the
restructuring did not occur. This result could occur because allocation of the
Portfolio's current unrealized capital gains will be different under
multiple-class accounting rules
7
<PAGE>
than has been the case under the partnership accounting of the current
structure. The actual realization of capital gains in the future remains
uncertain and depends not only on the Investment Adviser's decisions but also on
the fluctuating market valuation of specific securities. Because capital gains
distributions reduce the net asset value of a fund's shares, the effect of such
a distribution change is to alter current tax obligations and tax obligations
upon redemption (by the same amount).
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund, (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for
8
<PAGE>
servicing the investments of the Portfolio. Under its investment advisory
agreement with the Portfolio, BMR receives a monthly advisory fee equal to the
aggregate of
(a) a daily asset-based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income-based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gross income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
<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%
</TABLE>
As at March 31, 1997, the Portfolio had net assets of $102,503,516. For the
fiscal year ended March 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.48% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
William H. Ahern, Jr. has acted as the portfolio manager of the Portfolio since
May 1, 1997. He has been a Vice President of Eaton Vance and BMR since January
1996 and has been an employee of Eaton Vance 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 Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Fund, the Portfolio and BMR have adopted Codes of
Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by the Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in such
Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
9
<PAGE>
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE PAYMENTS FOR
PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE
PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER
PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR
ANY FISCAL YEAR. The Trustees of the Trust have initially implemented the Plan
by authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .15% of the
Fund's average daily net assets for any fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. However, the 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. During the fiscal year ended March 31, 1997, the Fund
paid or accrued service fees under the Plan equivalent to .15% of the Fund's
average daily net assets for such year.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
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 and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio), based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Municipal obligations will
normally be valued on the basis of valuations furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of the Fund through
Authorized Firms at the effective public offering price, which price is based on
the effective net asset value per share plus the applicable sales charge. The
Fund receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm. The Fund
may suspend the offering of shares at any time and may refuse an order for the
purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention or Right of Accumulation are available
from Authorized Firms or the Principal Underwriter.
10
<PAGE>
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE SALES CHARGE COMMISSION
AS AS AS
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.25% 2.30% 2.00%
$100,000 but less than $250,000 1.75 1.78 1.50
$250,000 but less than $500,000 1.50 1.52 1.25
$500,000 but less than $1,000,000 1.00 1.01 1.00
$1,000,000 or more 0.00* 0.00* 0.50
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more or where the amount invested represents redemption proceeds
from a mutual fund unaffiliated with Eaton Vance, if the redemption occurred
no more than 60 days' prior to the purchase of Fund shares and the redeemed
shares were potentially subject to a sales charge. A contingent deferred sales
charge ("CDSC") of 0.50% will be imposed on such investments (as described
below) in the event of certain redemptions within 12 months of purchase.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent"), as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to clients
and current and retired officers and employees of Eaton Vance, its affiliates
and other investment advisers of Eaton Vance sponsored funds; to registered
representatives, employees of Authorized Firms and to bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Shares may also be
issued at net asset value (1) in connection with the merger of an investment
company with the Fund, (2) to investors making an investment as part of a fixed
fee program whereby an entity unaffiliated with the Investment Adviser provides
multiple investment services, such as management, brokerage and custody, and (3)
to investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place trades
for their own account if the accounts are linked to the master account of such
investment advisor, financial planner or other intermediary on the books and
records of the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") and "rabbi trusts".
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
11
<PAGE>
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 Traditional National Limited Maturity Municipals Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional National Limited Maturity Municipals Fund
Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. 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.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period, then out of the initial purchase (or subsequent purchases
if necessary) 5% of the dollar amount specified on the application shall be held
in escrow by the escrow agent in the form of shares (computed to the nearest
full share at the public offering price applicable to the initial purchase
hereunder) registered in the investor's name. All income dividends and capital
gains distributions on escrowed shares will be paid to the investor or to the
investor's order. When the minimum investment so specified is completed, the
escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of the Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustment will be made only on those shares purchased through the
Firm then handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
12
<PAGE>
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS - BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more, or if
shares were purchased at net asset value because the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance (as
described under "How to Buy Fund Shares"), and are redeemed within
13
<PAGE>
12 months of purchase, a CDSC of 0.50% will be imposed on such redemption. The
CDSC will be imposed on an amount equal to the lesser of the current market
value or the original purchase price of the shares redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
price, including any distributions that have been reinvested in additional
shares. In determining whether a CDSC is applicable to a redemption, it will be
assumed that redemptions are made first from any shares in the shareholder's
account that are not subject to a CDSC. The CDSC will be retained by the
Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds in accordance with the conditions set forth under
"Eaton Vance Shareholder Services -- Reinvestment Privilege", the shareholder's
account will be credited with the amount of any CDSC paid on such redeemed
shares.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns. Consistent
with applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
14
<PAGE>
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Authorized Firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Exchange offers are available only in
states where shares of the fund being acquired may be legally sold.
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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
The Transfer Agent 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 Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Any such exchange is subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
15
<PAGE>
Telephone exchanges are accepted by the Transfer Agent, provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional National Limited Maturity Municipals Fund may be mailed directly to
the Transfer Agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123 at any time -- whether or not distributions are
reinvested. The name of the shareholder, the Fund, 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.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month period
are eligible for reduced sales charges. See "How to Buy Fund Shares -- Statement
of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest at
net asset value any portion or all of the redemption proceeds (plus that amount
necessary to acquire a fractional share to round off the purchase to the nearest
full share) in shares of the Fund, or, provided that the shares redeemed have
been held for at least 60 days, in shares of any of the other funds offered by
the Principal Underwriter subject to an initial sales charge, provided that the
reinvestment is effected within 60 days after such redemption, and the privilege
has not been used more than once in the prior 12 months. Shares are sold to a
reinvesting shareholder at the next determined net asset value following timely
receipt of a written purchase order by the Principal Underwriter or by the fund
the shares of which are being purchased (or by such fund's transfer agent). The
privilege is also available to shareholders of the funds listed under "The Eaton
Vance Exchange Privilege" who wish to reinvest such redemption proceeds in
shares of the Fund. If a shareholder reinvests redemption proceeds within the
60-day period, the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of the Fund are
sold at a loss and the proceeds are reinvested in shares of the Fund (or other
shares of the Fund are acquired) within the period beginning 30 days before and
ending 30 days after the date of the redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
16
<PAGE>
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the last day of each month or the next business day
thereafter. The Fund anticipates that for tax purposes the entire distribution,
whether taken in cash or reinvested in additional shares of the Fund, will
constitute tax-exempt income to shareholders, except for the proportionate part
of the distribution that may be considered taxable income if the Fund has
taxable income during the calendar year. Shareholders reinvesting the monthly
distribution should treat the amount of the entire distribution as the tax cost
basis of the additional shares acquired by reason of such reinvestment. Daily
distribution crediting will commence on the business day after collected funds
for the purchase of Fund shares are available at the Transfer Agent.
Shareholders will receive timely federal income tax information as to the
tax-exempt or taxable status of all distributions made by the Fund during the
calendar year. The Fund's net realized capital gains, if any, consist of the net
realized capital gains allocated to the Fund by the Portfolio for tax purposes,
after taking into account any available capital loss carryovers; the Fund's net
realized capital gains, if any, will be distributed at least once a year,
usually in December.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent a sales charge is
reduced or eliminated in a subsequent acquisition of shares of the Fund or of
another fund pursuant to the Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to avoid paying federal income taxes on
the part of its investment company taxable income (consisting generally of net
investment income and net short-term capital gain) and net capital gains that it
distributes to its shareholders. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Distributions of interest on certain municipal obligations constitute a tax
preference item under the AMT provisions applicable to individuals and
corporations. Distributions of taxable income (including a portion of any
original issue discount with respect to certain stripped municipal obligations
and stripped coupons and accretion of certain market discount) and net
short-term capital gains will be taxable to shareholders as ordinary income.
Distributions of long-term capital gains are taxable to shareholders as such for
federal income tax purposes, regardless of the length of time Fund shares have
been owned by the shareholder. If shares are purchased shortly before the record
date of such a distribution, the shareholder will pay the full price for the
shares and then receive some portion of the price back as a taxable
distribution. Distributions are taxed in the manner described above whether paid
in cash or reinvested in additional shares of the Fund. Tax-exempt distributions
received from the Fund are includable in a shareholder's tax base for
determining the taxability of social security and railroad retirement benefits.
The Code provides that interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Fund is not deductible to the
extent it is deemed related to the Fund's distributions of tax-exempt interest
dividends to the shareholder. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
industrial development or private activity bonds may be subject to tax on a
portion of the Fund's distributions to them of exempt interest dividends.
Accordingly, such users should consult their tax advisers before purchasing
shares of the Fund. "Substantial user" is defined in applicable Treasury
regulations to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of industrial
development bonds and would likely be interpreted to include private activity
bonds issued to finance similar facilities.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
17
<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. A taxable-equivalent yield is computed by using the tax-exempt
yield figure and dividing by one minus the tax rate. The Fund's average annual
total return is determined by computing the average annual percentage change in
value of $1,000 invested at the maximum public offering price (which includes
the maximum sales charge) for specified periods, assuming reinvestment of all
distributions. The Fund may publish annual and cumulative total return figures
from time to time. The Fund may also quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund sales charge.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be lower if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund are allocated to Eaton Vance, the Fund's performance
will be higher.
18
<PAGE>
[LOGO]
EATON VANCE
EV TRADITIONAL ==============
Mutual Funds
NATIONAL LIMITED MATURITY
MUNICIPALS FUND
PROSPECTUS
AUGUST 1, 1997
EV TRADITIONAL NATIONAL LIMITED MATURITY
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-LNAP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL
INFORMATION
August 1, 1997
EV CLASSIC LIMITED MATURITY MUNICIPAL FUNDS
<TABLE>
<S> <C>
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
</TABLE>
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund"), its
corresponding Portfolio and certain other series of Eaton Vance Investment
Trust (the "Trust"). Each Part II provides information solely about a Fund and
its corresponding Portfolio. Where appropriate, Part I includes cross-
references to the relevant sections of Part II that provide additional Fund--
specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI."
TABLE OF CONTENTS
PART I
Page
Additional Information About Investment Policies .................. 1
Investment Restrictions ........................................... 8
Trustees and Officers ............................................. 9
Investment Adviser and Administrator .............................. 10
Custodian ......................................................... 13
Service for Withdrawal ............................................ 13
Determination of Net Asset Value .................................. 14
Investment Performance ............................................ 14
Taxes ............................................................. 16
Principal Underwriter ............................................. 18
Distribution Plan ................................................. 18
Portfolio Security Transactions ................................... 20
Other Information ................................................. 21
Independent Certified Public Accountants .......................... 23
Financial Statements .............................................. 23
Appendix .......................................................... 24
PART II
EV Classic Florida Limited Maturity Municipals Fund ............... a-1
EV Classic Massachusetts Limited Maturity Municipals Fund ......... b-1
EV Classic New York Limited Maturity Municipals Fund .............. c-1
EV Classic Pennsylvania Limited Maturity Municipals Fund .......... 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 AUGUST 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED
STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON
VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR
ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of
the Trust and the Portfolio. Capitalized terms used in this SAI and not
otherwise defined have the meanings given them in the Fund's Prospectus. The
Fund is subject to the same investment policies as those of the Portfolio. The
Fund currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever
issued), which include obligations issued directly by state and local
governments or their agencies to fulfill essential governmental functions;
(ii) certain obligations issued before August 8, 1986, for the benefit of non-
governmental persons or entities; and (iii) certain "private activity bonds"
issued after August 7, 1986, which include "qualified Section 501(c)(3) bonds"
or refundings of certain obligations included in the second category. In
assessing the federal income tax treatment of interest on any municipal
obligation, the Portfolio will generally rely on an opinion of the issuer's
counsel (when available) and will not undertake any independent verification
of the basis for the opinion. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986
is exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the
recipient's liability for the AMT. For corporate shareholders, the Fund's
distributions derived from interest on all municipal obligations (whenever
issued) is included in "adjusted current earnings" for purposes of the AMT as
applied to corporations (to the extent not already included in alternative
minimum taxable income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than
one year) purchased after April 30, 1993 other than, in general, at their
original issue, is taxable as ordinary income. A long-term debt obligation is
generally treated as acquired at a market discount if purchased after its
original issue at a price less than (i) the stated principal amount payable at
maturity, in the case of an obligation that does not have original issue
discount or (ii) in the case of an obligation that does have original issue
discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis
exclusion.
Issuers of general obligation bonds include states, counties, cities,
towns and regional districts. The proceeds of these obligations are used to
fund a wide range of public projects including the construction or improvement
of schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the
issuer's pledge of its faith, credit, and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source.
Revenue bonds have been issued to fund a wide variety of capital projects
including: electric, gas, water, sewer and solid waste disposal systems;
highways, bridges and tunnels; port, airport and parking facilities;
transportation systems; housing facilities, colleges and universities and
hospitals. Although the principal security behind these bonds varies widely,
many provide additional security in the form of a debt service reserve fund
whose monies may be used to make principal and interest payments on the
issuer's obligations. Housing finance authorities have a wide range of
security including partially or fully insured, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. In addition to a debt service reserve fund, some authorities provide
further security in the form of a state's ability (without legal obligation)
to make up deficiencies in the debt service reserve fund. Lease rental revenue
bonds issued by a state or local authority for capital projects are normally
secured by annual lease rental payments from the state or locality to the
authority sufficient to cover debt service on the authority's obligations.
Such payments are usually subject to annual appropriations by the state or
locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the
industrial user or users.
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 municipal obligation are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Act, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. There is also the possibility that as a result of
litigation or other conditions the power or ability of any person or entity to
pay when due principal of and interest on a municipal obligation may be
materially affected. There have been recent instances of defaults and
bankruptcies involving municipal obligations which were not foreseen by the
financial and investment communities. 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
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 municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment,
general money market conditions, general conditions of the municipal bond
market, size of a particular offering, maturity of the obligation and rating
of the issue. The ratings of Moody's, S&P and Fitch represent their opinions
as to the quality of the municipal obligations which they undertake to rate.
It should be emphasized, however, that ratings are based on judgment and are
not absolute standards of quality. Consequently, municipal obligations with
the same maturity, coupon and rating may have different yields while
obligations of the same maturity and coupon with different ratings may have
the same yield. In addition, the market price of municipal 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
Municipal Obligations of a Particular State. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of
Concentration" in the Fund's Part II.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There
could be economic, business or political developments which might affect all
municipal obligations of the same type. In particular, investments in
industrial revenue bonds might involve (without limitation) the following
risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of
increase of hospital charges.
Electric utilities face problems in financing large construction programs
in an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear
facilities), difficulty in obtaining fuel at reasonable prices, and in
achieving timely and adequate rate relief from regulatory commissions, effects
of energy conservation and limitations on the capacity of the capital market
to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style
and, if needed, the comprehensive care of nursing home services. Bonds to
finance these facilities have been issued by various state and local
authorities. Since the bonds are normally secured only by the revenues of each
facility and not by state or local government tax payments, they are subject
to a wide variety of risks. Primarily, the projects must maintain adequate
occupancy levels to be able to provide revenues sufficient to meet debt
service payments. Moreover, since a portion of housing, medical care and other
services may be financed by an initial deposit, it is important that the
facility maintain adequate financial reserves to secure estimated actuarial
liabilities. The ability of management to accurately forecast inflationary
cost pressures is an important factor in this process. The facilities may also
be affected adversely by regulatory cost restrictions applied to health care
delivery in general, particularly state regulations or changes in Medicare and
Medicaid payments or qualifications, or restrictions imposed by medical
insurance companies. They may also face competition from alternative health
care or conventional housing facilities in the private or public sector.
Obligations of Puerto Rico, U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in its 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, the U.S. Virgin
Islands and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross
domestic product and is more diversified than during earlier phases of Puerto
Rico's industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and
manufacturing (16.4%). These three sectors represent 37.5%, 11% and 41.8%,
respectively, of the gross domestic product. The service sector is the fastest
growing, followed by manufacturing which has begun to show signs of expansion.
The North American Free Trade Agreement ("NAFTA"), which became effective
January 1, 1994, could lead to the loss of Puerto Rico's lower salaried or
labor intensive jobs to Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the
states in its relationship with the federal government. Most federal taxes,
except those such as social security taxes that are imposed by mutual consent,
are not levied in Puerto Rico. However, in conjunction with the 1993 U.S.
budget plan, Section 936 of the Code was amended and provided for two
alternative limitations to the Section 936 credit. The first option will limit
the credit against such income to 40% of the credit allowable under then
current law, with a five year phase-in period starting at 60% of the allowable
credit. The second option was a wage and depreciation based credit. Additional
amendments to Section 936 in 1996 imposed caps on these credits, beginning in
1998 for the first option and beginning in 2002 for the second option. More
importantly, the 1996 amendments eliminated both options for taxable years
beginning in 2006. The eventual elimination of tax benefits to those U.S.
companies with operations in Puerto Rico may lead to slower growth in the
future. There can be no assurance that this will not lead to a weakened
economy, a lower rating on Puerto Rico's debt or lower prices for Puerto Rican
bonds that may be held by the Portfolio in the long-term. Short-term affects
are minimal.
Puerto Rico's financial reporting was first conformed to generally
accepted accounting principles in fiscal 1990. Nonrecurring revenues have been
used frequently to balance recent years' budgets. In November, 1993 Puerto
Ricans voted on whether they wished to retain their Commonwealth status,
become a state or establish an independent nation. Puerto Ricans voted to
retain Commonwealth status, leaving intact the current relationship with the
federal government. There can be no assurance that the statehood issue will
not be brought to a vote in the future. A successful statehood vote in Puerto
Rico would then require the U.S. Congress to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. In 1996,
unemployment stood at 13.8%. The tourism industry is economically sensitive
and would likely be adversely affected by a recession in either the United
States or Europe.
An important component of the USVI revenue base is the federal excise tax
on rum exports. Tax revenues rebated by the federal government to the USVI
provide the primary security of many outstanding USVI bonds. Since more than
90% of the rum distilled in the USVI is distilled at one plant, any
interruption in its operations (as occurred after Hurricane Hugo in 1989)
would adversely affect these revenues. Consequently, there can be no assurance
that rum exports to the United States and the rebate of tax revenues to the
USVI will continue at their present levels. The preferential tariff treatment
the USVI rum industry currently enjoys could be reduced under NAFTA. Increased
competition from Mexican rum producers could reduce USVI rum imported to the
U.S., decreasing excise tax revenues generated. The USVI is periodically hit
by hurricanes. Several hurricanes have caused extensive damage, and a drop in
tourism, which has had a negative impact on revenue collections. There is
currently no rated, unenhanced Virgin Islands debt outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast
of Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. The
Naval Air Station, one of several U.S. military facilities on the island, has
been slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the
Island's commercial airport. Guam is also heavily reliant on tourists,
particularly the Japanese. For 1995, the government realized a General Fund
operating surplus. The administration has taken steps to improve its financial
position; however, there are no guarantees that an improvement will be
realized. Guam's general obligation debt is rated BBB by S&P with a negative
outlook.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which
is issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the government issuer) have
evolved as a means for government issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to
these arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. Such arrangements are, therefore, subject to the risk
that the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities
for the purpose of such limitation. In determining the liquidity of municipal
lease obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease
obligations affecting the marketability thereof. These include the general
creditworthiness of the municipality, the importance of the property covered
by the lease to the municipality, and the likelihood that the marketability of
the obligation will be maintained throughout the time the obligation is held
by the Portfolio. In the event the Portfolio acquires an unrated municipal
lease obligation, the Investment Adviser will be responsible for determining
the credit quality of such obligation on an on-going basis, including an
assessment of the likelihood that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue
and compound over the period until maturity at a rate of interest reflecting
the market rate of the security at the time of issuance. Zero coupon bonds
benefit the issuer by mitigating its need for cash to meet debt service, but
also require a higher rate of return to attract investors who are willing to
defer receipt of such cash.
INSURANCE
Insured municipal obligations held by 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 municipal obligations. In
evaluating the credit quality of a particular issue, whether rated or unrated,
the Investment Adviser will normally take into consideration, among other
things, the financial resources of the issuer (or, as appropriate, of the
underlying source of funds for debt service), its sensitivity to economic
conditions and trends, any operating history of and the community support for
the facility financed by the issue, the ability of the issuer's management and
regulatory matters. The Investment Adviser will attempt to reduce the risks of
investing in the lowest investment grade, below investment grade and
comparable unrated obligations through active portfolio management, credit
analysis and attention to current developments and trends in the economy and
the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated
by reference into this SAI with respect to any defaulted obligations held by
the Portfolio.
SHORT-TERM TRADING
The Portfolio may sell (and later purchase) securities in anticipation of
a market decline (a rise in interest rates) or purchase and later sell
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the
same time to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such
as changes in the overall demand for or supply of various types of municipal
obligations or changes in the investment objectives of investors. Such trading
may be expected to increase the portfolio turnover rate, which may increase
capital gains and the expenses incurred in connection with such trading. The
Portfolio anticipates that its annual portfolio turnover rate will generally
not exceed 100% (excluding turnover of securities having a maturity of one
year or less). 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. For the Portfolio
turnover rate of the Portfolio, see "Supplementary Data" in the Portfolio's
financial statements included in the Fund's annual report.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of 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 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 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 1940 Act 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. Longer term fixed-rate bonds may give the holder
a right to request redemption at certain times (often annually after the lapse
of an intermediate term). These bonds are more defensive than conventional
long term bonds (protecting to some degree against a rise in interest rates)
while providing greater opportunity than comparable intermediate term bonds,
because the Portfolio may retain the bond if interest rates decline. By
acquiring these kinds of obligations 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. Because this right is
assignable with the security, which is readily marketable and valued in the
customary manner, the Portfolio will not assign any separate value to such
right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
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. Interest income
generated by certain bonds having put or demand features may not qualify as
tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. The Portfolio
would have the right to call a loan and obtain the securities loaned at any
time on up to five business days' notice. During the existence of a loan, the
Portfolio will continue to receive the equivalent of the interest paid by the
issuer on the securities loaned and will also receive a fee, or all or a
portion of the interest on investment of the collateral, if any. However, the
Portfolio may pay lending fees to such borrowers. The Portfolio would not have
the right to vote any securities having voting rights during the existence of
the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or the giving or withholding of their
consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. However, the loans will be made only to organizations deemed by
the Portfolio's management to be of good standing and when, in the judgment of
the Portfolio's management, the consideration which can be earned from
securities loans of this type, net of administration expenses and other
finder's fees, 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.
FUTURES CONTRACTS AND OPTIONS ON 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, the Portfolio may enter into
(i) futures contracts for the purchase or sale of debt securities, and (ii)
futures contracts on securities indices. All futures contracts entered into by
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. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or
foreign exchange or board of trade. The Portfolio will be required, in
connection with transactions in futures contracts and the writing of options
on futures, to make margin deposits, which will be held by the Portfolio's
custodian for the benefit of the futures commission merchant through whom the
Portfolio engages in such futures and options transactions.
Some futures contracts and options thereon may become illiquid under
adverse market conditions. In addition, during periods of market volatility, a
commodity exchange may suspend or limit transactions in an exchange-traded
instrument, which may make the instrument temporarily illiquid and difficult
to price. Commodity exchanges may also establish daily limits on the amount
that the price of a futures contract or futures option can vary from the
previous day's settlement price. Once the daily limit is reached, no trades
may be made that day at a price beyond the limit. This may prevent the
Portfolio from closing out positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price
fluctuations in securities held by the Portfolio or which it expects to
purchase. The Portfolio's futures transactions will be entered into for
traditional hedging purposes -- that is, futures contracts will be sold to
protect against a decline in the price of securities that the Portfolio owns,
or futures contracts will be purchased to protect the Portfolio against an
increase in the price of securities it intends to purchase. 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 Code for
maintaining qualification of the Fund as a regulated investment company for
federal income tax purposes (see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another
party. The Portfolio will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities or other options
or futures contracts, or (2) cash or liquid securities (such as readily
marketable obligations and money market instruments) with a value sufficient
at all times to cover its potential obligations not covered as provided in (1)
above. The Portfolio will comply with Commission guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash or
liquid securities in a segregated account with its custodian in the prescribed
amount. The securities in the segregated account will be marked to market
daily.
Assets used as cover or held in a segregated account maintained by the
custodian cannot be sold while the position requiring coverage or segregation
is outstanding unless they are replaced with other appropriate assets. As a
result, the commitment of a large portion of the Portfolio's assets to
segregated accounts or cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
SHORT-TERM OBLIGATIONS
Although the Portfolio will normally attempt to invest substantially all
of its assets in municipal 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, AMT and/or State
taxes. Such short-term taxable obligations may include, but are not limited
to, certificates of deposit, commercial paper, short-term notes and
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities. During periods of adverse market conditions, the
Portfolio may temporarily invest more than 20% of its assets in such short-
term taxable obligations, all of which will be high quality.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund 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 SAI 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. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance
margin in connection with futures contracts or related options transactions is
not considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests
in real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest
or deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, or (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.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or with respect to the Portfolio by the Trustees of
the Portfolio without the approval of the Fund or its other investors. As a
matter of nonfundamental policy, the Fund and the Portfolio will not: (a)
engage in options, futures or forward transactions if more than 5% of its net
assets, as measured by the aggregate of the premiums paid by the Fund or the
Portfolio, would be so invested; (b) make short sales of securities or
maintain a short position, unless at all times when a short position is open
it owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short, and
unless not more than 25% of the Fund's net assets (taken at current value) is
held as collateral for such sales at any one time. (The Fund and the Portfolio
will make such sales only for the purpose of deferring realization of gain or
loss for federal income tax purposes); or (c) invest more than 15% of its net
assets in investments which are not readily marketable, including restricted
securities and repurchase agreements maturing in more than seven days.
Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933 and commercial paper issued pursuant to Section 4(2) of said Act that
the Board of Trustees of the Trust or the Portfolio, or its delegate,
determines to be liquid.
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 Investment Adviser on the basis of the
characteristics of the obligation and other relevant factors, the most
significant of which is the source of funds committed to meeting interest and
principal payments of such obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, or any
subsequent rating change below investment grade made by a rating service, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Where applicable and notwithstanding the foregoing,
under normal market conditions the Fund and the Portfolio must take actions
necessary to comply with the policy of investing at least 65% of total assets
in a particular state. Moreover, the Fund and Portfolio must always be in
compliance with the borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the 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 Investment Adviser, BMR,
a wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust and the Portfolio as
defined in the 1940 Act by virtue of their affiliation with Eaton Vance, BMR,
EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected 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 (40), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV, and
employee of Eaton Vance since March 8, 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 (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was
Executive Vice President of Neuberger & Berman Management, Inc., a mutual
fund management company. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March
27, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate
attorney at Dechert, Price & Rhoads. Officer of various investment companies
managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary
on June 19, 1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Fund's Part II.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent certified public accountants, and reviewing
matters relative to trading and brokerage policies and practices, accounting
and auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian, transfer agent and
dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the 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. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in the Fund's Part II.
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 over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $18 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than
any other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual
fund portfolios. Assets managed by the municipal investment group are
currently over $9.1 billion.
The following persons manage one or more of the Eaton Vance limited
maturity municipal portfolios. For the identity of the Portfolio's portfolio
manager, see the Fund's current Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr.
Ahern graduated from Boston College in 1981 with a B.A. in economics, and
received his M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern
is a member of the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
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 any
litigation, proceedings and claims and any legal obligation of the Portfolio
to indemnify its Trustees, officers and investors with respect thereto, to the
extent not covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. 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 Part II.
The Investment Advisory Agreement with BMR continues in effect from year
to year so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Trustees of the Portfolio cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio. 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. 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, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with 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 Trust's registration under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying the
Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of the Fund and of the Fund's principal underwriter,
if any, as broker-dealer or agent under state securities laws, (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and
proxy solicitations therefor, (x) expenses of reports to governmental officers
and commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of books and accounts and
determination of net asset values), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing
shareholder accounts, (xvi) any direct charges to shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with any litigation, proceedings and claims and any legal obligation of the
Trust to indemnify its Trustees and officers with respect thereto, to the
extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
BMR, Eaton Vance and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or officers and Directors of EVC and EV. As
of July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Dynner and Hawkes are
officers or Trustees of the Trust and the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Browse, Fetter,
MacIntosh, Murphy, O'Connor and Woodbury and Ms. Anderes and Ms. Sanders, are
officers of the Trust and/or the Portfolio and are also members of the BMR,
Eaton Vance and EV organizations.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns 22% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in precious metal mining venture investment and management. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund or the Portfolio
and such banks.
CUSTODIAN
IBT acts as custodian for the 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. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or Portfolio and IBT under
the 1940 Act.
IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission, for which it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or
quarterly payments of any permitted amount designated by the shareholder (see
"Eaton Vance Shareholder Services -- Withdrawal Plan" in the Fund's current
Prospectus) based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, although they are a return of principal, may
require the recognition of taxable gain or loss. Income dividends and capital
gains distributions in connection with withdrawal accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not
have a withdrawal plan in effect at the same time he or she has authorized
Bank Automated Investing or is otherwise making regular purchases of Fund
shares. The shareholder, the Transfer Agent or the Principal Underwriter will
be able to terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of 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 municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transaction prices for
most municipal obligations held by the Portfolio, and such obligations,
including those purchased on a when-issued basis, will normally be valued on
the basis of valuations furnished by a pricing service. The pricing service
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities, various relationships
between securities, and yield to maturity in determining value. Taxable
obligations for which price quotations are readily available normally will be
valued at the mean between the latest available bid and asked prices. Open
futures positions on debt securities are valued at the most recent settlement
prices, unless such price does not reflect the fair value of the contract, in
which case the positions will be valued by the Trustees of the Portfolio.
Other assets are valued at fair value using methods determined in good faith
by or at the direction of the Trustees of the Portfolio. The Fund and the
Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied
to determine the value of the investor's interest in the Portfolio for the
current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the results. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, a complete redemption of the investment
and the deduction of the CDSC at the end of the period. For further
information concerning the total return of the Fund, see "Performance
Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing 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 distributions during the
period. This yield figure does not reflect the deduction of the CDSC imposed
on certain redemptions of shares within one year of their purchase. See "How
to Redeem Fund Shares" in the Prospectus. A taxable-equivalent yield is
computed by dividing the tax-exempt yield by 1 minus a stated rate. For the
yield and taxable-equivalent yield of the Fund, see "Performance Information"
in the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or 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
(the days in a year divided by the accrued days of the monthly period) used to
annualize the most recent monthly distribution and reinvesting the resulting
amount for a full year on the basis of such ratio. The effective distribution
rate will be higher than the distribution rate because of the compounding
effect of the assumed reinvestment. Investors should note that the Fund's
yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a
settlement date basis), whereas the distribution rate is based on the Fund's
last monthly distribution which tends to be relatively stable and may be more
or less than the amount of net investment income and short-term capital gain
actually earned by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including other investment companies.
The Fund may provide investors with information on municipal bond
investing, which may include comparative performance information, evaluations
of Fund performance, charts and/or illustrations prepared by independent
sources (such as Lipper Analytical Services, Inc., CDA/Wiesenberger,
Morningstar, Inc., The Bond Buyer, the Federal Reserve Board or The Wall
Street Journal). The Fund may also refer in investor publications to Tax
Freedom Day, as computed by the Tax Foundation, Washington, DC 20005, to help
illustrate the value of tax free investing, as well as other tax-related
information. Information, charts and illustrations showing the effects of
inflation and taxes (including their effects on the dollar and the return on
various investments) and compounding earnings may also be included in
advertisements and materials furnished to present and prospective investors.
Information about portfolio allocation and holdings of 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.
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. Such information may also compare
the taxable equivalent yield (or value) of the Fund to the after-tax yield (or
value) of such other investment vehicles. A bank certificate of deposit,
unlike the Fund's shares, pays a fixed rate of interest and entitles the
depositor to receive the face amount of the certificate of deposit at
maturity. A bank money market deposit account is a form of savings account
which pays a variable rate of interest. Unlike the Fund's shares, bank
certificates of deposit and bank money market deposit accounts are insured by
the Federal Deposit Insurance Corporation. A money market mutual fund is
designed to maintain a constant value of $1.00 per share and, thus, a money
market fund's shares are subject to less price fluctuation than the Fund's
shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in municipal
bond funds. Such information may describe the following advantages of
investing in a municipal bond mutual fund versus individual municipal bonds:
regular monthly income; free reinvestment of distributions; potential for
increased income; bond diversification; liquidity; low-cost easy access; and
active management and in depth credit analysis by investment professionals. In
addition, by investing in a municipal bond fund instead of individual bonds,
an investor can avoid dealing with the complexities of the municipal bond
market, while benefitting from the market access and lower transactions costs
enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective
investors. Such material or advertisements may also provide information on the
use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated and intends to qualify
each year, as a regulated investment company ("RIC") under the Code.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its ordinary income (including tax-exempt income) and net
income (after reduction by any available capital loss carryforwards) in
accordance with the timing requirements imposed by the Code, so as to maintain
its RIC status and to avoid paying any federal income or excise tax. The Fund
so qualified for its fiscal year ended March 31, 1997. Because the Fund
invests its assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to also satisfy these requirements. 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 RIC, the Fund (i) will be deemed to own its
proportionate share of each of the assets of the Portfolio and (ii) will be
entitled to the gross income of the Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of its capital gain
net income (which is the excess of its realized capital gains over its
realized capital losses), generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by (i) any available
capital loss carryforwards and 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 RIC and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
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 securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from
the Portfolio to make distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto.
The Code is not entirely clear regarding the federal income tax consequences
of the Fund's taking certain positions in connection with ownership of such
distressed securities. For example, the Code is unclear regarding: (i) when
the Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts
or worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges
of debt obligations in a workout context are taxable.
Distributions by 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 under Code
Section 103(a). For purposes of applying this 50% requirement, the Fund will
be deemed to own its proportionate share of each of the assets of the
Portfolio, and the Portfolio currently intends to invest its assets in a
manner such that the Fund can meet this 50% requirement. Interest on certain
municipal obligations is treated as a tax preference item for purposes of the
AMT. Shareholders of 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 discount with respect to certain stripped municipal
obligations or their stripped coupons, and certain realized gains or income
attributable to accrued market discount. Any distributions by the Fund of its
share of such capital gains (after reduction by any capital loss
carryforwards) or taxable income would be taxable to shareholders of the Fund.
However, it is expected that such amounts, if any, would normally be
insubstantial in relation to the tax exempt interest earned by the Portfolio
and allocated to the Fund. Certain distributions of the Fund, if declared in
October, November or December and paid the following January, may be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
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 periods of
Portfolio securities, and conversion of short-term capital losses 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 RIC status
for federal income tax purposes.
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 disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and,
to the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net long-
term capital gains with respect to such shares. In addition, a loss realized
on a redemption or other disposition of Fund shares may be disallowed to the
extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30
days before the redemption of the loss shares and ending 30 days after such
date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS"), as well as shareholders with respect to whom the Fund has
received certain information from the IRS or a broker, may be subject to
"backup" withholding of federal income tax arising from the Fund's taxable
dividends and other distributions as well as the proceeds of redemption
transactions (including repurchases and exchanges), at a rate of 31%. An
individual's TIN is generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax convention.
Distributions from the excess of the Fund's net long-term capital gain over
its net short-term capital loss received by such shareholders and any gain
from the sale or other disposition of shares of the Fund generally will not be
subject to U.S. federal income taxation, provided that non-resident alien
status has been certified by the shareholder. Different U.S. tax consequences
may arise if: (i) the shareholder is engaged in a trade or business in the
United States; (ii) the shareholder is present in the United States for a
sufficient period of time during a taxable year to be treated as a U.S.
resident (generally 180 days or more); or (iii) the shareholder fails to
provide any required certifications regarding its status as a non-resident
alien investor. Foreign shareholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own
tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local and, where applicable,
foreign tax consequences of investing in 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 Authorized Firms or investors and other
selling literature and of advertising are borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its 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 the noninterested Trustees 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 Part
II.
DISTRIBUTION PLAN
The Plan is designed to meet the requirements of Rule 12b-1 under the 1940
Act and the sales charge rule of the NASD. The purpose of the Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The 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 shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions), the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 6.25% of the
amount received by the Fund for each share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of uncovered distribution
charges (as described below) of the Principal Underwriter.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day by the Fund is limited
to 1/365 of .75% of the Fund's net assets on such day. The level of the Fund's
net assets changes each day and depends upon the amount of sales and
redemptions of Fund shares, the changes in the value of the investments held
by the Portfolio, the expenses of the Fund and the Portfolio accrued and
allocated to the Fund on such day, income on portfolio investments of the
Portfolio accrued and allocated to the Fund on such day, and any dividends and
distributions declared on Fund shares. The Fund does not accrue possible
future payments as a liability of the Fund or reduce the Fund's current net
assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal
Underwriter whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and CDSCs
therefore paid or payable to the Principal Underwriter will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does
not constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund 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 Fund
shares upon which a CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC will be imposed (including redemptions of
Fund shares pursuant to the exchange privilege which result in a reduction of
uncovered distribution charges), changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan. Periods with a high level of sales of Fund
shares accompanied by a low level of early redemptions of Fund shares
resulting in the imposition of CDSCs will tend to increase the time during
which there will exist uncovered distribution charges of the Principal
Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal .90% of the Fund's average daily net assets per annum.
For actual 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. The Fund believes that the combined
rate of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions 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 Fund shares and through the amounts paid to the
Principal Underwriter, including CDSCs, pursuant to the Plan. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts theretofore received by the Principal
Underwriter under the Plan and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing 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.
Pursuant to Rule 12b-1, the Plan has been approved by the Board of
Trustees of the Trust. The Plan continues in effect from year to year for so
long as such continuance is approved at least annually by the vote of both a
majority of (i) the noninterested Trustees of the Trust who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees
then in office, and the Distribution Agreement contains a similar provision.
The Plan and Distribution Agreement may be terminated at any time by a vote
of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. The Plan requires quarterly Trustee
review of a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund and the Trustees. So long as the Plan is in effect,
the selection and nomination of the noninterested Trustees shall be committed
to the discretion of such Trustees.
The Trustees of the Trust believe that the Plan will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which have benefited and will
continue to 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 commission
or spread, 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 compensation 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 NASD, which rule provides that
no firm which is a member of the NASD shall favor or disfavor the distribution
of shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by such
firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits 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 Part II.
OTHER INFORMATION
The Trust is organized as a Massachusetts business trust under a
Declaration of Trust dated October 23, 1985, as amended, and was originally
called Eaton Vance California Municipals Trust. The Trust changed its name to
Eaton Vance Investment Trust on April 28, 1992. Eaton Vance, pursuant to its
agreement with the Trust, controls the use of the words "Eaton Vance" and "EV"
in the Fund's name and may use the words "Eaton Vance" or "EV" in other
connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series or classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class.)
Moreover, the Trust's By-laws also provide for indemnification out of the
property of the Fund of any shareholder held personally liable solely by
reason of being or having been a shareholder for all loss or expense arising
from such liability. The assets of the Fund are readily marketable and will
ordinarily substantially exceed its liabilities. In light of the nature of the
Fund's business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is extremely remote.
In accordance with the Declaration of Trust of 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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of 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.
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.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any
emergency as determined by the Commission which makes it impracticable for the
Portfolio to dispose of its securities or value its assets, or during any
other period permitted by order of the Commission for the protection of
investors.
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 Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended March 31,
1997, as previously electronically filed with the Commission:
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
Florida Limited Maturity Municipals Portfolio
Massachusetts Limited Maturity Municipals Portfolio
New York Limited Maturity Municipals Portfolio
Pennsylvania Limited Maturity Municipals Portfolio
(Accession No. 0000950146-97-000909)
<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 fluctuations 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 in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
- ---------------------------
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this 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.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors
affecting 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
VMIG, 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 VMIG symbol
to reflect such characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be
limited to the external liquidity with no or limited legal recourse to the
issuer in the event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
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, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk 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
that 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 Standard & Poor's 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.
PROVISIONAL RATINGS: 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: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
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: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest; with some
vulnerability to adverse financial and economic charges over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment.
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 actual or imminent default of 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 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 is likely to 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 CLASSIC FLORIDA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Florida considerations is given to
investors in view of the Portfolio's policy of concentrating its investments
in Florida issuers. Such information supplements the information in the
Prospectus and 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
Florida issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Florida is a state characterized by rapid population growth and
substantial capital needs which are being funded through more frequent debt
issuances and pay-as-you-go financing. Florida's economy is characterized by a
large service sector, a dependence on the tourism and construction industries,
and a large retirement population. The management of rapid growth has been the
major challenge facing state and local governments. While attracting many
senior citizens, Florida also offers a favorable business environment and
growing employment opportunities that have continued to generate working-age
population immigration. As this growth continues, particularly within the
retirement population, the demand for both public and private services will
increase, which may strain the service sector's capacity and impede the
State's budget balancing efforts.
Florida has a proportionally greater number of persons of retirement age;
a factor that makes Florida's property and transfer payment taxes a relatively
more important source of state funding. Because transfer payments are
typically less sensitive to the business cycle than employment income, they
may act as a stabilizing force in weak economic periods.
Florida tourism appears to be suffering the effects of negative publicity
regarding crime against tourists in the State, product maturity, higher prices
and more aggressive marketing by competing vacation destinations. Tourist
arrivals are expected to increase 2.7% and 3.2% in fiscal years 1996-97 and
1997-98, respectively. The total number of visiting tourists is expected to
reach 42.6 million and 43.9 million during fiscal years 1996-97 and 1997-98,
respectively.
There has been a decline in Florida's dependency on highly cyclical
construction and construction-related manufacturing sectors. For example, the
total contract construction employment as a share of total non-farm employment
reached a peak of over 10% in 1973. In 1980, the share was roughly 7.5%, and
in 1995, the share had edged downward to nearly 5%. This trend is expected to
continue as Florida's economy continues to diversify.
The ability of the State and its local units of government to satisfy its
debt obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the
State in which the issuer of the debt obligations is located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and investment
capital. North and Central Florida are impacted by problems in the
agricultural sector, particularly with regard to the citrus and sugar
industries. Short-term adverse economic conditions may be created in these
areas, and in the State as a whole, due to crop failures, severe weather
conditions or other agriculture-related problems. The State economy also has
historically been dependent on the tourism and construction industries and is,
therefore, sensitive to trends in those sectors.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $92,909,192. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $508,203, $664,262 and $821,095, respectively (equivalent to
0.46%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and
1995, $7,111, $18,370 and $37,904, respectively, of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $42,770 on sales of shares of
the Fund. During the same period, the Fund paid or accrued sales commissions
under the Plan aggregating $51,482, and the Principal Underwriter received
approximately $3,250 in CDSCs which were imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$3,383,200. During the fiscal year ended March 31, 1997, the Fund made service
fee payments under the Plan aggregating $10,338, of which $8,489 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $162.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1995, the Portfolio paid no
brokerage commissions on portfolio transactions. For the fiscal year ended
March 31, 1996, the Portfolio paid brokerage commissions of $10,609 on
portfolio security transactions aggregating $95,025,037 to firms which
provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities).
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of
the Portfolio 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, 1997, 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 funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight ...... $35 $1,557(2) $145,000(5)
Samuel L. Hayes, III .. 31 1,808(3) 155,000(6)
Norton H. Reamer ...... 31 1,687 145,000
John L. Thorndike ..... 32 1,818(4) 148,750(7)
Jack L. Treynor ....... 35 1,796 150,000
- --------------
(1) The Eaton Vance fund complex consists of 213 registered investment
companies or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 23, 1997. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund from May 29, 1992 through
March 31, 1997 and for the one-year period ended March 31, 1997. The total
return for the period prior to the Fund's commencement of operations on
December 8, 1993 reflects the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund CDSC. Total return for
this time period has not been adjusted to reflect the Fund's distribution and/
or service fees and certain other expenses. If such an adjustment were made,
the performance would have been lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING CDSC DEDUCTING CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC** ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------ ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 5/29/92 $1,000 $1,224.99 $1,224.99 22.50% 4.28% 22.50% 4.28%
1 Year Ended 3/31/97* 3/31/96 $1,000 $1,018.76 $1,008.95 1.88% 1.88% 0.90% 0.90%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more
or less than their original cost.
- ------------
*If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
**No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.68%. The yield required of a taxable security that would produce an after-
tax yield equivalent to that earned by the Fund of 3.68% would be 5.62%,
assuming a combined federal and state tax rate of 34.48%. If a portion of the
Fund's expenses had not been allocated to the Administrator, the Fund would
have had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable
tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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 June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville,
FL 32246, was the record owner of approximately 37.56% 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 has voting power under certain
limited circumstances. In addition, the following shareholders owned
beneficially and of record the approximate percentages of outstanding shares
of the Fund indicated after their names: Elmer M. Seaman TTEE, Elmer M. Seaman
Trust DTD June 25, 1985 FBO Elmer M. Seaman, Boca Raton, FL 33428-1609
(20.07%). To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic Florida Limited Maturity Tax
Free Fund to EV Classic Florida Limited Maturity Municipals Fund on December
15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The tables below give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and the Florida intangibles tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
YOU ARE IN
THIS IN YOUR FEDERAL TAX BRACKET, A TAX-FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON FEDERAL ----------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------ -------------------------- ----------- ----------------------------------------------------------
EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,650 Up to $41,200 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751-$124,650 $ 99,601-$151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651-$271,050 $151,751-$271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
<CAPTION>
UNDER FLORIDA INTANGIBLES TAX LAW, A TAX FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON ------------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------ -------------------------- ------------------------------------------------------------
EQUALS A TAX EQUIVALENT YIELD REFLECTING EXEMPTION FROM
INTANGIBLES TAX:**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,650 Up to $41,200 4.95% 5.54% 6.13% 6.71% 7.30% 7.89% 8.48%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 5.85 6.54 7.23 7.93 8.62 9.31 10.01
$ 59,751-$124,650 $ 99,601-$151,750 6.10 6.83 7.55 8.27 9.00 9.72 10.44
$124,651-$271,050 $151,751-$271,050 6.58 7.36 8.14 8.92 9.70 10.48 11.26
Over $271,050 Over $271,050 6.97 7.80 8.62 9.45 10.28 11.10 11.93
</TABLE>
*Net amount subject to federal personal income tax after deductions and
exemptions.
**A Florida intangibles tax on personal property of $2.00 per $1,000 is
generally imposed after exemptions on the value of stocks, bonds, other
evidences of indebtedness and mutual fund shares. An example of the effect
of the Florida intangibles tax on the tax brackets of Florida taxpayers is
as follows. A $10,000 investment subject to the tax would require payment of
$20 annually in intangibles taxes. If the investment yielded 5.5% annually
or $550, the intangibles tax as a percentage of income would be $20/$550 or
3.64%. If a taxpayer were in the 36% federal income tax bracket, assuming
the intangibles taxes were deducted as an itemized deduction on the federal
return, the taxpayer would be in a combined federal and Florida state tax
bracket of 38.33% [36% + (1 - .36) X 3.64%] with respect to such investment.
A Florida taxpayer whose intangible personal property is exempt or partially
exempt from tax due to the availability of exemptions will have a lower
taxable equivalent yield than indicated above.
Note: The federal income tax brackets do not take into account the effect of a
reduction in the deductibility of itemized deductions for taxpayers with
adjusted gross income in excess of $121,200. The tax brackets also do not show
the effects of phaseout of personal exemptions for single and joint filers
with adjusted gross incomes in excess of $121,200 and $181,800, respectively.
The effective tax brackets and equivalent taxable yields of such taxpayers
will be higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and
allocated to the Fund may be taxable. The table does not take into account the
Florida intangibles tax, state or local taxes, if any, payable on Fund
distributions to individuals who are not Florida residents, or intangibles
taxes, if any, imposed under the laws of other states. It should also be noted
that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated
as a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits
that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors
should consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC MASSACHUSETTS LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Massachusetts considerations is
given to investors in view of the Portfolio's policy of concentrating its
investments in Massachusetts issuers. Such information supplements the
information in the Prospectus and 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 Massachusetts issuers. Neither the Trust nor the Portfolio has
independently verified this information.
Beginning in 1989, the Commonwealth's economy slowed significantly. Most of
the employment growth during this period was experienced in the services and
trade sectors of the economy, while the manufacturing sector continues to suffer
employment losses. Like most other industrial states, Massachusetts has seen a
shift in employment from manufacturing to more technology and service- based
industries. Between 1993 and 1994, per capita personal income in Massachusetts
increased 3.6% as compared to 1.7% for the nation as a whole. The unemployment
rate for the Commonwealth fell from 4.6% in January, 1996 to 4.0% in January,
1997.
1995 Fiscal Year. Fiscal 1995 tax revenue collections totalled $11.163
billion. Budgeted revenues and other sources, including non-tax revenue
collected in fiscal 1995 totalled $16.387 billion, approximately $837 million,
or 5.4%, above 1994 budgeted revenues of $15.550 billion. Budgeted expenditures
and other uses of funds in fiscal 1995 were approximately $16.251 billion,
approximately $728 million, or 4.7% above fiscal 1994 budgeted expenditures and
uses of $15.523 billion. The Commonwealth ended fiscal 1995 with an operating
gain of $137 million and an ending fund balance of $726 million.
1996 Fiscal Year. Current fiscal 1996 projected spending is approximately
$16.963 billion, including approximately $153.2 million reserved for
contingencies. Projected revenues are approximately $16.851 billion. The fiscal
1996 forecast for federal reimbursements has decreased by approximately $7
million primarily due to lower reimbursable spending in public assistance
programs.
1997 Fiscal Year. On April 13, 1996, the House of Representatives adopted a
fiscal 1997 budget that provides for total expenditures of approximately $17.615
billion. A legislative conference committee will develop a compromise budget for
consideration by the House and Senate, which upon enactment by both houses will
be presented to the Governor. Tax collections are reported to be well above the
Revenue Department's target range.
Major infrastructure projects are anticipated over the next decade. It is
currently anticipated that the federal government will assume responsibility for
approximately 90% of the estimated $7.7 billion cost. The projects include the
depression of the central artery which traverses the City of Boston and the
construction of a third harbor tunnel linking downtown Boston to Logan Airport.
The Massachusetts Water Resources Authority is undertaking capital projects for
the construction and rehabilitation of sewage collection and treatment
facilities in order to bring wastewater discharges into Boston Harbor into
compliance with federal and state pollution control requirements. The harbor
cleanup project is estimated to cost $3.5 billion in 1994 dollars. Work on the
project began in 1988 and is expected to be complete in 1999, with the most
significant expenditures occurring between 1990 and 1999. The majority of the
project's expenditures will be paid for by local communities, in the form of
user fees, with federal and state sources making up the difference; the
assumptions regarding the amounts to be supplied through federal aid are subject
to change.
The fiscal viability of the Commonwealth's authorities and Municipalities is
inextricably linked to that of the Commonwealth. The Commonwealth guarantees the
debt of several authorities, most notably the Massachusetts Bay Transportation
Authority and the University of Massachusetts Building Authority. Their ratings
are based on this guarantee and can be expected to move in tandem. Several other
authorities are funded in part or in whole by the Commonwealth and their debt
ratings may be adversely affected by a negative change in those of the
Commonwealth.
Massachusetts' municipal governments are constrained in their ability to
increase local revenues by an initiative passed in 1980, "Proposition 2 1/2."
Proposition 2 1/2 limits the amount of property taxes that can be levied in a
fiscal year to the lower of 2.5% of fair value or 102.5% of the previous year's
levy unless overridden by a majority of local voters. Proposition 2 1/2 also
limits the amount the municipality can be charged by certain government entities
such as counties. While Proposition 2 1/2 is not a constitutional question and
can therefore be amended or abolished by the legislature, no significant
challenge has been raised since it took effect. Increased revenues received by
the state and passed on to local governments during the 1980's ameliorated the
effect of this initiative and made local governments in Massachusetts more
dependent on state aid than those in other states. Therefore, the recent fiscal
problems encountered by the state have amplified the economic and fiscal
problems encountered by cities and towns throughout the Commonwealth. A
continuation of the Commonwealth's fiscal problems resulting in further local
aid reductions could, in the absence of overrides, result in payment defaults by
local cities and towns and/or ratings downgrades resulting in an erosion of
their market value.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $69,969,936. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $385,610, $506,126 and $559,365, respectively (equivalent to
0.47%, 0.46% and 0.46% respectively, of the Portfolio's average daily net assets
for each such year). The Portfolio's Investment Advisory Agreement with BMR is
dated October 13, 1992 and may be continued as described under "Investment
Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$13,863, $24,619 and $21,812, respectively, of the Fund's operating expenses
were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement may continue as described
under "Distribution Plan" in Part I. 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, as required by Rule
12b-1. During the fiscal year ended March 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $32,326 on sales of shares of the
Fund. During the same period, the Fund paid or accrued sales commissions under
the Plan aggregating $35,812, and the Principal Underwriter received
approximately $436 in CDSCs which were imposed on early redeeming shareholders.
These payments reduced uncovered distribution charges under the Plan. As at
March 31, 1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $718,700. During
the fiscal year ended March 31, 1997, the Fund made service fee payments under
the Plan aggregating $7,169, of which $6,353 was paid to Authorized Firms and
the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $147.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $27,291 and $7,995, respectively, on portfolio security
transactions aggregating $255,964,805 and $71,608,464, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight ....... $9 $1,141(2) $145,000(5)
Samuel L. Hayes, III ... 8 1,431(3) 155,000(6)
Norton H. Reamer ....... 8 1,311 145,000
John L. Thorndike ...... 8 1,432(4) 148,750(7)
Jack L. Treynor ........ 8 1,381 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 23, 1997. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from June 1, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on December 9, 1993
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund CDSC. Total return for this time period has not been
adjusted to reflect the Fund's distribution and/ or service fees and certain
other expenses. If such an adjustment were made, the performance would have been
lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING CDSC DEDUCTING CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC** -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 6/1/92 $1,000 $1,229.62 $1,229.62 22.96% 4.37% 22.96% 4.37%
1 Year Ended
3/31/97* 3/31/96 $1,000 $1,027.04 $1,017.15 2.70% 2.70% 1.72% 1.72%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ------------
* If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
** No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.79%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.79% (considering both State and
federal taxes) would be 6.24%, assuming a combined federal and State tax rate of
39.28%. If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246, was the record owner of approximately 43.54% 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 has 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
names: Everen Clearing Corp., a/c 4160-2407, Robert F. Johnston, Milwaukee, WI
53202 (12.89%); Ronnie Z. Siegel, Hyannis, MA 02601-3030 (12.26%); and Elizabeth
L. King & Peter King TTEES, Elizabeth L. King Rev. Tr. DTD 7/20/93, Amherst, MA
01002 (5.70%). To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic Massachusetts Limited Maturity Tax
Free Fund to EV Classic Massachusetts Limited Maturity Municipals Fund on
December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Massachusetts state income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND MASSACHUSETTS STATE
SINGLE RETURN JOINT RETURN COMBINED TAX EXEMPT YIELD OF:
FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- MA STATE ---------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 25.20% 5.35% 6.02% 6.68% 7.35% 8.02% 8.69% 9.36%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 36.64 6.31 7.10 7.89 8.68 9.47 10.26 11.05
$ 59,751 - $124,650 $ 99,601 - $151,750 39.28 6.59 7.41 8.23 9.06 9.88 10.70 11.53
$124,651 - $271,050 $151,751 - $271,050 43.68 7.10 7.99 8.88 9.77 10.65 11.54 12.43
Over $271,050 Over $271,050 46.85 7.53 8.47 9.41 10.35 11.29 12.23 13.17
* Net amount subject to federal and Massachusetts personal income tax after deductions and exemptions.
+ The combined tax rates include a Massachusetts tax rate of 12% applicable to taxable bond interest and dividends, and assume
that Massachusetts taxes are itemized deductions for federal income tax purposes. Investors who do not itemize deductions on
their federal income tax return will have a higher combined bracket and higher taxable equivalent yield than those indicated
above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36%, and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Massachusetts state income
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint filers
with adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Massachusetts personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Massachusetts personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits that
may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC NEW YORK LIMITED MATURITY
MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain New York considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
New York issuers. Such information supplements the information in the Prospectus
and 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 New York issuers.
Neither the Trust nor the Portfolio has independently verified this information.
The recession lasted longer in New York and the State's economic recovery
has lagged behind the nation's. Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been below the
national average primarily due to significant cutbacks in the computer,
manufacturing, utility, defense and banking industries. New York's economy is
expected to continue to expand modestly during 1997. The unemployment rate for
the State in February, 1997 was 6.3%, unchanged from last year, versus 5.3% for
the nation. New York City's unemployment rate was 8.8% for 1996, up from 8.2% a
year earlier.
In July 1995, the State Comptroller issued its audit of the State's
1994-1995 fiscal year prepared in accordance with generally accepted auditing
standards. The State completed its 1994-1995 fiscal year with a General Fund
operating deficit of $1.426 billion, as compared with an operating surplus of
$914 million for the previous fiscal year. The 1994-1995 fiscal year deficit was
caused by several factors including the adoption of changes in accounting
methodologies by the State Comptroller. The State used $1.026 billion of the
1993-1994 fiscal year surplus in the 1994-1995 fiscal year.
The State ended its 1995-1996 fiscal year in balance, with a reported
1995-1996 General Fund cash surplus of $445 million. Prior to adoption of the
State's 1995-1996 fiscal year budget, the State had projected a potential budget
gap of approximately $5 billion, which was closed primarily through spending
reductions, cost containment measures, State agency actions and local assistance
reforms.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase of
tax revenues in the wake of tax reductions in 1996, with personal income tax
receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer taxes
and fees up 2.5%. Tax collections were particularly enhanced by the booming
financial sector. Growth in that sector is expected to slow in fiscal year 1998,
which could impact tax revenue growth. Government spending also declined by
0.9%, particular capital spending and debt service.
During the past several years, the State has been forced to borrow on a
seasonal basis due to cash flow timing problems. In June, 1990, the Local
Government Assistance Corporation ("LGAC") was formed as a public benefit
corporation for the purpose of issuing long term obligations designed to
eliminate this need. The legislation which created the LGAC specified that the
obligations will be amortized over no more than 30 years and put a $4.7 billion
dollar cap, net of LGAC proceeds, on the seasonal borrowing program. As of June
1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion
completing the program. This cap may be exceeded in cases where the Governor and
the legislature have certified the need for additional borrowing and have
devised a method for reducing it back to the cap no later than the fourth fiscal
year after the limit is exceeded. If this cap were to be exceeded, it could
result in action by the rating agencies which could adversely affect prices of
bonds held by the Portfolio.
In 1975, New York City encountered severe financial difficulties which
impaired and continues to impair the borrowing ability of the City. For each of
the 1981 through 1996 fiscal years, the City achieved balanced operating results
as reported in accordance with generally accepted accounting principles.
Pursuant to the laws of the State, the City prepares a four-year annual
financial plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections and outlines
proposed gap-closing programs for years with projected budget gaps. The City
implemented various actions to close projected budget gaps of $3.3 billion, $2.3
billion, $3.1 billion and $2.7 billion for the 1994, 1995, 1996 and 1997 fiscal
years, respectively. Such actions included, among others, tax increases, service
and personnel reductions, productivity savings, debt refinancings, asset sales
and cost savings related to employee benefits. For the 1998 fiscal year, the
City previously projected a budget gap of $720 million after taking into account
the prepayment in the 1997 fiscal year of $856 million of debt service due in
the 1998 and 1999 fiscal years. Various gap-closing actions to balance the 1998
fiscal year budget include, advancing fiscal year 1997 surplus into fiscal year
1998, reductions in entitlement programs, federal welfare reform savings,
additional state aid, cost saving initiatives and asset sales. The City
currently projects budget gaps of $2.0 billion, $2.9 billion and $2.7 billion
for its 1999, 2000 and 2001 fiscal years, respectively. The City's gap-closing
plans for the 1999 through 2001 fiscal years include savings from restructuring
city government and privatization, City agency actions, additional State aid,
asset sales and cost saving actions related to entitlement programs and
procurement. There can be no assurance that additional gap-closing measures will
not be required, the implementation of which could adversely affect the City's
economic base, and there is no assurance that such measures will enable the City
to achieve a balanced budget, as required by State law, for any of the 1997
through 2001 fiscal years. Implementation of the City's four-year annual
financial plan is also dependent upon the City's ability to market its
securities successfully in the public credit markets. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $5.7
billion of general obligation bonds and $5.7 billion of bonds to be issued by
the New York City Transitional Finance Authority (TFA) primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make other
capital investments. In 1997, the State enacted the New York City Transitional
Finance Authority Act (the "Finance Authority Act"), which created the TFA to
assist the City to avoid certain state constitutional debt limitations. The TFA
is authorized to issue up to $7.5 billion in long-term debt. On June 2, 1997, an
action was brought in the State Supreme Court, Albany County seeking a
declaratory judgment declaring that the Finance Authority Act to be
unconstitutional. If the Finance Authority Act were voided, and depending on
whether the New York State Legislature took other action which would provide
relief to the City under the general debt limit, the City might be required to
curtail its currently defined capital program early in the 1998 fiscal year. The
fiscal health of New York City, which is the largest issuer of municipal bonds
in the country and a leading international commercial center, exerts a
significant influence upon the fiscal health and bond values of issues
throughout the State. Bond values of the Municipal Assistance Corporation, the
State of New York, the New York Local Government Assistance Corporation, the New
York State Dormitory Authority -- City University, the New York City Municipal
Water Finance Authority and The Metropolitan Transportation Authority would be
particularly affected by serious financial difficulties encountered by New York
City. The Portfolio could be expected to hold bonds issued by many, if not all
of these issuers, at any given time.
As of 1997, the City's general obligation bonds were rated "Baa1," "BBB+"
and "A-" by Moody's, S&P and Fitch, respectively. On July 10, 1995, S&P revised
downward its rating on City general obligation bonds from A- to BBB+. On
February 28, 1996, Fitch placed the City's general obligation bonds on Fitch
Alert with negative implications. On November 5, 1996, Fitch removed the City's
general obligation bonds from FitchAlert, although Fitch stated that the outlook
remains negative. There is no assurance that such ratings will continue for any
given period of time or that they will not be revised downward or withdrawn
entirely. Any such downward revision or withdrawal could have an adverse effect
on obligations held by the Portfolio. Ratings for the State are Moody's "A(2)",
S&P "A-" and Fitch "A+".
The State's economic and fiscal viability are mutually and intricately tied
to those of its authorities and localities, which make up the major portion of
State bond issuance. Any serious financial difficulties encountered by these
entities, including their inability to access capital markets, would have a
significant, adverse effect upon the value of bonds issued elsewhere within the
State and thus upon the value of the interests in the Portfolio. State plans to
reduce aid to local cities and towns may have a negative impact on municipal
finances and ratings throughout the State. Such ratings changes could erode the
value of their bonds and/or lead to defaults.
The State either guarantees or supports lease-purchase agreements or
contractual obligations, financing arrangements or through moral obligation
provisions, a large amount of Authority indebtedness. While debt service is
normally paid out of revenues generated by the projects of the Authorities, the
State has, from time to time, had to appropriate amounts to enable the
Authorities to meet their financial obligations and, in some cases, to prevent
default.
FEES AND EXPENSES
INVESTMENT ADVISORY
As of March 31, 1997, the Portfolio had net assets of $100,013,748. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $557,305, $722,493 and $845,836, respectively (equivalent to
0.46% of the Portfolio's average daily net assets for each such year). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992 and
may be continued as described under "Investment Adviser and Administrator" in
Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$13,587, $21,238 and $31,253, respectively, of the Fund's operating expenses
were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement may continue as described
under "Distribution Plan" in Part I. 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, as required by Rule
12b-1. During the fiscal year ended March 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $24,757 on sales of shares of the
Fund. During the same period, the Fund paid or accrued sales commissions under
the Plan aggregating $28,559, and the Principal Underwriter did not receive any
CDSCs which were imposed on early redeeming shareholders. The sales commissions
reduced uncovered distribution charges under the Plan. As at March 31, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter
calculated under the Plan amounted to approximately $876,900. During the fiscal
year ended March 31, 1997, the Fund made service fee payments under the Plan
aggregating $5,733, of which $4,966 was paid to Authorized Firms and the balance
of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $82.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $40,494 and $11,615, respectively, on portfolio
security transactions aggregating $360,095,562 and $104,037,530, respectively,
to firms which provided some research services to BMR or its affiliates
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended March 31, 1995, the Portfolio paid no brokerage commissions on
portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight ....... $0 $1,557(2) $145,000(5)
Samuel L. Hayes, III ... 0 1,808(3) 155,000(6)
Norton H. Reamer ....... 0 1,687 145,000
John L. Thorndike ...... 0 1,818(4) 148,750(7)
Jack L. Treynor ........ 0 1,796 150,000
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio
since May 1, 1997. Ms. Anderes has been a Vice President of BMR and Eaton
Vance since 1994 and is an officer of various investment companies managed by
Eaton Vance or BMR. Prior to joining Eaton Vance, Ms. Anderes was Vice
President and portfolio manager, Lazard Freres Asset Management (1992-1994).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from May 29, 1992 through March
31, 1997 and the one-year period ended March 31, 1997. The total return for the
period prior to the Fund's commencement of operations on December 8, 1993
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund CDSC. Total return for this time period has not been
adjusted to reflect the Fund's distribution and/or service fees and certain
other expenses. If such an adjustment were made, the performance would have been
lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC** -------------------------- ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------ ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 5/29/92 $1,000 $1,232.94 $1,232.94 23.29% 4.42% 23.29% 4.42%
1 Year Ended
3/31/97* 3/31/96 $1,000 $1,028.37 $1,018.46 2.84% 2.84% 1.85% 1.85%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ------------
*If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
**No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.72%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.72% (considering both State and
federal taxes) would be 6.10%, assuming a combined federal and State tax rate of
38.99%. If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
In any year in which the Fund is subject to New York taxation, qualifies as
a RIC under Subchapter M of the Code and distributes all of its investment
company taxable income and net capital gains, the Fund will not be required to
pay any New York State franchise tax or New York City general corporation tax,
with the possible exception of certain nominal minimum taxes.
Distributions from the Fund will not be excluded from net income and shares
of the Fund will not be excluded from investment capital in determining New York
State or City franchise and corporation taxes for corporate shareholders.
Shares of the Fund will not be subject to the New York State or City
property tax.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 25.88% of the outstanding shares,
which were held on behalf of its customers who are the beneficial owners of such
shares, and as to which they have voting power under certain limited
circumstances. In addition, as of such date the following shareholders owned of
record, the percentages of shares indicated after their names: NFSC FEBO
#CL5-368350, Carroll Janis, New York, NY 10019 (11.49%). To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic New York Limited Maturity Tax Free
Fund to EV Classic New York Limited Maturity Municipals Fund on December 15,
1995.
<PAGE>
TAX EQUIVALENT YIELD TABLES
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State and New York City income tax laws in effect for 1997.
<TABLE>
<CAPTION>
COMBINED
FEDERAL,
SINGLE RETURN JOINT RETURN NY STATE A FEDERAL, NEW YORK STATE AND NEW YORK CITY TAX EXEMPT YIELD OF:
- ------------------------- ---------------------- AND NY CITY ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------------- --------------- ---------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 24.55% 5.30% 5.96% 6.63% 7.29% 7.95% 8.62% 9.28%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 36.14 6.26 7.05 7.83 8.61 9.40 10.18 10.96
$ 59,751 - $124,650 $ 99,601 - $151,750 38.80 6.54 7.35 8.17 8.99 9.80 10.62 11.44
$124,651 - $271,050 $151,751 - $271,050 43.24 7.05 7.93 8.81 9.69 10.57 11.45 12.33
Over $271,050 Over $271,050 46.43 7.47 8.40 9.33 10.27 11.20 12.13 13.07
</TABLE>
*Net amount subject to federal, New York State and New York City personal
income tax (including New York City personal income tax surcharges) after
deductions and exemptions.
+The first combined tax bracket is calculated using the highest State rate
(6.85%) and the highest City rate (including surcharges) within the bracket.
Taxpayers with taxable income below the highest dollar amount in the first
bracket may have a lower combined tax bracket and taxable equivalent yield
than indicated above. The applicable State and City rates are at their maximum
(6.85% and 4.457%, respectively) throughout all other brackets. The applicable
federal tax rates within each of these combined tax brackets are 15%, 28%,
31%, 36%, and 39.6% over the same ranges of income.
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State income tax laws in effect for 1997.
<TABLE>
<CAPTION>
COMBINED
SINGLE RETURN JOINT RETURN FEDERAL AND A FEDERAL AND NEW YORK STATE TAX EXEMPT YIELD OF:
- ------------------------- ---------------------- NY STATE ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------------- --------------- ---------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.82% 5.05% 5.68% 6.31% 6.95% 7.58% 8.21% 8.84%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$ 59,751 - $124,650 $ 99,601 - $151,750 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.89
$124,651 - $271,050 $151,751 - $271,050 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74
Over $271,050 Over $271,050 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44
</TABLE>
*Net amount subject to federal and New York State and personal income tax after
deductions and exemptions.
+The first combined tax bracket is calculated using the highest State rate
(6.85%) within the bracket. Taxpayers with taxable income below the highest
dollar amount in the first bracket may have a lower combined tax bracket and
taxable equivalent yield than indicated above. The applicable State rate is
the maximum rate, 6.85%, throughout all other brackets. 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.
Note: Yields shown are for illustration purposes only and are not meant to
represent the Fund's actual yield. No assurance can be given that the Fund will
achieve any specific tax exempt yield. While it is expected that the Portfolio
will invest principally in obligations the interest from which is exempt from
the regular federal income tax and New York State and New York City personal
income taxes, other income received by the Portfolio and allocated to the Fund
may be taxable. The table does not take into account state or local taxes, if
any, payable on Fund distributions except for New York State and New York City
personal income taxes. It should also be noted that the interest earned on
certain "private activity bonds" issued after August 7, 1986, while exempt from
the regular federal income tax, is treated as a tax preference item which could
subject the recipient to the federal alternative minimum tax. The illustrations
assume that the federal alternative minimum tax is not applicable and do not
take into account any tax credits that may be available.
The above-indicated combined federal and New York State/City income brackets
assume State and City taxes are itemized deductions and do not take into account
the effect of a reduction in the deductibility of itemized deductions (including
New York State and City income taxes) for taxpayers with adjusted gross income
in excess of $121,200, nor do they reflect phaseout of personal exemptions for
single and joint filers with adjusted gross income in excess of $121,200 and
$181,800, respectively. The effective combined tax brackets and equivalent
taxable yields of taxpayers who do not itemize or who are subject to such
limitations will be higher than those indicated above. In addition, investors
who do not itemize deductions on their federal income tax returns will have
higher combined brackets and equivalent taxable yields than indicated above.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC PENNSYLVANIA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Pennsylvania considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in Pennsylvania issuers. Such information supplements the information in the
Prospectus and 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
Pennsylvania issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Pennsylvania historically has been identified as a heavy industry state,
although that reputation has changed with the decline of the coal, steel and
railroad industries and the resulting diversification of Pennsylvania's
industrial composition. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania continues, however, to have a greater percentage of
its workers employed in manufacturing than the national average, leaving the
economy somewhat cyclical and vulnerable to recessionary forces. During 1995,
manufacturing accounted for 18% of employment. As of March, 1997, the unadjusted
unemployment rate for Pennsylvania was 5.4%. Per capita income in Pennsylvania
for 1995 of $23,558 was higher than the per capita income of the United States
of $23,208.
Revenues and Expenditures. Pennsylvania utilizes the fund method of accounting.
The General Fund, the State's largest fund, receives all tax receipts, revenues,
federal grants and reimbursements that are not specified by law to be deposited
elsewhere. Debt service on all obligations, except those issued for highway
purposes or for the benefit of other special revenue funds, is payable from the
General Fund. The General Fund closed fiscal year 1996 with a balance of $635
million.
For 1997, the Commonwealth expects a slight improvement in the State's
financial position. The 1997 budget provides for only a 0.6% increase in
expenditures. As of this date, revenues were better than expected but a slow
down in collections is expected. State enacted welfare reform has enabled the
Administration to limit expenditure growth. The 1998 proposed budget calls for a
2.9% increase in expenditures.
The Pennsylvania Constitution requires all proceeds of motor fuels taxes,
vehicle registration fees, license taxes, operators" license fees and other
excise taxes imposed on products used in motor transportation to be used
exclusively for construction, reconstruction, maintenance and repair of and
safety on highways and bridges and for the payment of debt service on
obligations incurred for such purposes. The Motor License Fund is the fund
through which such revenues are accounted for and expended.
Pennsylvania Debt. The current Constitutional provisions pertaining to the
Pennsylvania debt permit the issuance of the following types of debt: (i) debt
to suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years (this debt need not be approved by the electorate)
and (iv) tax anticipation notes payable in the fiscal year of issuance. All debt
except tax anticipation notes must be amortized in substantial and regular
amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes, which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
outstanding, may not exceed in the aggregate 20% of the revenues estimated to
accrue to the appropriate fund in the fiscal year. The State is not permitted to
fund deficits between fiscal years with any form of debt. All year end deficit
balances must be funded within the succeeding fiscal year's budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-Related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of or revenues derived from the various projects
financed; it is not an obligation of the State. Some of these agencies, however,
are indirectly dependent on state appropriations. State- related agencies and
their outstanding debt as of December 31, 1996 include the Delaware River Joint
Toll Bridge Commission ($53.9 million), the Delaware River Port Authority
($523.8 million), the Pennsylvania Economic Development Financing Authority
($1,371.5 million), the Pennsylvania Energy Development Authority ($118.0
million), the Pennsylvania Higher Education Assistance Agency ($1,408.8
million), the Pennsylvania Higher Education Facilities Authority ($2,667.1
million), the Pennsylvania Industrial Development Authority ($416.2 million),
the Pennsylvania Infrastructure Investment Authority ($205.9 million), the
Pennsylvania Turnpike Commission ($1,205.8 million), the Philadelphia Regional
Port Authority ($61.1 million) and the State Public School Building Authority
($324.0 million).
The only obligations of state-created agencies in Pennsylvania which bear a
moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,357.9 million in bonds
outstanding at December 31, 1996, and the Hospitals and Higher Education
Facilities Authority of Philadelphia which issued $21.1 million in bonds in
1993.
Litigation. Pennsylvania is currently involved in certain litigation where
adverse decisions could have an adverse impact on its ability to pay debt
service. In Baby Neal v. Commonwealth, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. County of
Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In Pennsylvania Association of Rural and Small Schools v.
Casey, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Local Government Debt. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically.
There is extensive general legislation applying to local government. For
example, the Local Government Unit Debt Act provides for uniform debt limits for
local government units, including municipalities and school districts, and
prescribes methods of incurring, evidencing, securing and collecting debt. Under
the Local Government Unit Debt Act, the ability of Pennsylvania municipalities
and school districts to engage in general obligation borrowing without electoral
approval is generally limited by their recent revenue collection experience.
Generally such subdivisions can levy real property taxes unlimited as to rate or
amount to pay debt service on general obligation borrowings.
Municipalities may also issue revenue obligations without limit and without
affecting their general obligation borrowing capacity if the obligations are
projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are widespread
in Pennsylvania. An authority is organized by a municipality acting singly or
jointly with another municipality and is governed by a board appointed by the
governing unit of the creating municipality or municipalities. Typically,
authorities are established to acquire, own and lease or operate one or more
projects and to borrow money and issue revenue bonds to finance them.
As of the date of this SAI, the City of Philadelphia's general obligations
are rated Ba, B and BB, by Moody's, S&P and Fitch, respectively.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $67,875,607. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $375,224, $478,819 and $554,521, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$7,751 $26,171 and $44,656, respectively, of the Fund's operating expenses were
allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement may continue as described
under "Distribution Plan" in Part I. 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, as required by Rule
12b-1. During the fiscal year ended March 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $37,970 on sales of shares of the
Fund. During the same period, the Fund paid or accrued sales commissions under
the Plan aggregating $48,556, and the Principal Underwriter received $6,098 in
CDSCs which were imposed on early redeeming shareholders. These payments reduced
uncovered distribution charges under the Plan. As at March 31, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter
calculated under the Plan amounted to approximately $1,625,500. During the
fiscal year ended March 31, 1997, the Fund made service fee payments under the
plan aggregating $9,636, of which $7,502 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Princial
Underwriter $202.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $34,923 and $7,542, respectively, on portfolio security
transactions aggregating $365,165,141 and $67,553,927, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight ...... $35 $1,141(2) $145,000(5)
Samuel L. Hayes, III .. 31 1,431(3) 155,000(6)
Norton H. Reamer ...... 31 1,311 145,000
John L. Thorndike ..... 32 1,432(4) 148,750(7)
Jack L. Treynor ....... 35 1,381 150,000
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (38) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since June 23, 1997. Mr. Browse has been a Vice President of BMR and Eaton
Vance since 1993 and an employee of Eaton Vance since 1992. Mr. Browse is an
officer of various investment companies managed by Eaton Vance or BMR. Prior
to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader -- Fidelity
Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from June 1, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on December 8, 1993
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund CDSC. Total return for this time period has not been
adjusted to reflect the Fund's distribution and/ or service fees and certain
other expenses. If such an adjustment were made, the performance would have been
lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING CDSC DEDUCTING CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC** ------------------------- -------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 6/1/92 $1,000 $1,247.51 $1,247.51 24.75% 4.69% 24.75% 4.69%
1 Year Ended
3/31/97* 3/31/96 $1,000 $1,029.29 $1,019.38 2.93% 2.93% 1.94% 1.94%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ------------
* If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
** No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.77%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.77% (considering both State and
federal taxes) would be 6.31%, assuming a combined federal and State tax rate of
40.25%. If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 and Donaldson Lufkin Jenrette Securities Corporation Inc., Jersey City, NJ
07303-9998 were the record owners of approximately 16.42% and 9.38%,
respectively, of the outstanding shares, which were held on behalf of their
customers who are the beneficial owners of such shares, and as to which they
have voting power under certain limited circumstances. In addition, as of such
date, the following shareholders owned of record, the percentages of shares
indicated after their names: BHC Securities Inc. FBO 22439700, Attn: Mutual Fund
Dept., Philadelphia, PA 19103 (18.72%); PaineWebber for the Benefit of Stephen
Berman, Newtown Square, PA 19073-2012 (8.35%); and Raymond James & Assoc. Inc.,
for Elite Acct #50025098, FAO Jane L. Renshaw POA, Genevieve T. Hommer, Glasgow,
PA 16644-0010 (7.13%). To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
OTHER INFORMATION
The Fund changed its name from EV Classic Pennsylvania Limited Maturity Tax
Free Fund to EV Classic Pennslyvania Limited Maturity Municipals Fund on
December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding 6% under the regular federal income tax and Pennsylvania
State and local tax laws in effect for 1997.
<TABLE>
<CAPTION>
TAXABLE YIELD NEEDED TO MATCH 6% FREE OF
--------------------------------------------------
FEDERAL, STATE,
TAXABLE INCOME FEDERAL FEDERAL, STATE COUNTY AND
- ------------------------------------------------- FEDERAL STATE AND STATE AND COUNTY PHILADELPHIA
SINGLE RETURN JOINT RETURN INCOME TAX INCOME TAX TAXES TAXES (1) TAXES (2)
- ------------------------- ---------------------- ------------- ------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.00% 2.80% 7.26% 7.80% 8.24%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 28.00 2.80 8.57 9.20 9.72
$ 59,751 - $124,650 $ 99,601 - $151,750 31.00 2.80 8.95 9.60 10.15
$124,651 - $271,050 $151,751 - $271,050 36.00 2.80 9.65 10.36 10.94
Over $271,050 Over $271,050 39.60 2.80 10.22 10.97 11.59
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes deducted
from income. Included in all areas are the effects of: federal income tax and a
2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal property tax
imposed by most counties, and (2) Includes a 4 mil county personal property tax
and a 4.84% school income tax. The equivalent yields assume that the
Pennsylvania State and local taxes referred to above are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their
federal income tax return will have a higher equivalent yield than indicated.
Note: The above-indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions (including
Pennsylvania State and local taxes) for taxpayers with adjusted gross income in
excess of $121,200. The tax brackets and taxable equivalent yields also do not
show the effects of phaseout of personal exemptions for single filers with
adjusted gross income in excess of $121,200 and joint filers with adjusted gross
income in excess of $181,800. The effective federal tax brackets and equivalent
taxable yields of such taxpayers will be higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Pennsylvania State and local income taxes, other
income received by the Portfolio and allocated to the Fund may be taxable. It
should also be noted that the interest earned on certain "private activity
bonds" issued after August 7, 1986, while exempt from the regular federal income
tax, is treated as a tax preference item which could subject the recipient to
the federal alternative minimum tax. The illustrations assume the federal
alternative minimum tax is not applicable and do not take into account any tax
credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
[GRAPHIC OMITTED]
EV CLASSIC LIMITED MATURITY MUNICIPAL FUNDS
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV CLASSIC
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-LC8/1SAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV MARATHON LIMITED MATURITY MUNICIPAL FUNDS
<TABLE>
<S> <C>
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MASSACHUSETTS LIMITED MATURITY EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
MUNICIPALS FUND EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
</TABLE>
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund"), its
corresponding Portfolio and certain other series of Eaton Vance Investment Trust
(the "Trust"). Each Part II provides information solely about a Fund and its
corresponding Portfolio. Where appropriate, Part I includes cross-references to
the relevant sections of Part II that provide additional Fund- specific
information. This Statement of Additional Information is sometimes referred to
herein as the "SAI."
TABLE OF CONTENTS
PART I
Page
Additional Information About Investment Policies .................... 1
Investment Restrictions ............................................. 7
Trustees and Officers ............................................... 9
Investment Adviser and Administrator ................................ 10
Custodian ........................................................... 13
Service for Withdrawal .............................................. 13
Determination of Net Asset Value .................................... 13
Investment Performance .............................................. 14
Taxes ............................................................... 16
Principal Underwriter ............................................... 17
Distribution Plan ................................................... 18
Portfolio Security Transactions ..................................... 20
Other Information ................................................... 21
Independent Certified Public Accountants ............................ 23
Financial Statements ................................................ 23
Appendix ............................................................ 24
PART II
<TABLE>
<S> <C>
EV Marathon California Limited Maturity Municipals Fund .. a-1 EV Marathon Michigan Limited Maturity Municipals Fund ..... e-1
EV Marathon Connecticut Limited Maturity Municipals Fund . b-1 EV Marathon New Jersey Limited Maturity Municipals Fund ... f-1
EV Marathon Florida Limited Maturity Municipals Fund ..... c-1 EV Marathon New York Limited Maturity Municipals Fund ..... g-1
EV Marathon Massachusetts Limited Maturity EV Marathon Ohio Limited Maturity Municipals Fund ......... h-1
Municipals Fund ........................................ d-1 EV Marathon Pennsylvania Limited Maturity Municipals Fund.. i-1
</TABLE>
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 AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED STATEMENT
OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986, for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986, which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. In assessing the federal
income tax treatment of interest on any municipal obligation, the Portfolio will
generally rely on an opinion of the issuer's counsel (when available) and will
not undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, the Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 other than, in general, at their original
issue, is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue
at a price less than (i) the stated principal amount payable at maturity, in the
case of an obligation that does not have original issue discount or (ii) in the
case of an obligation that does have original issue discount, the sum of the
issue price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
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 municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. 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 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 municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment, general
money market conditions, general conditions of the municipal bond market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the municipal obligations which they undertake to rate. It should be
emphasized, however, that ratings are based on judgment and are not absolute
standards of quality. Consequently, municipal obligations with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield. In
addition, the market price of municipal 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
Municipal Obligations of a Particular State. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of Concentration"
in the Fund's Part II.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or more
of its total assets in municipal obligations of the same type. There could be
economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in industrial revenue
bonds might involve (without limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
Obligations of Puerto Rico, U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in its 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, the U.S. Virgin
Islands and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 37.5%, 11% and 41.8%, respectively, of
the gross domestic product. The service sector is the fastest growing, followed
by manufacturing which has begun to show signs of expansion. The North American
Free Trade Agreement ("NAFTA"), which became effective January 1, 1994, could
lead to the loss of Puerto Rico's lower salaried or labor intensive jobs to
Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the federal government. Most federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Code was amended and provided for two alternative limitations
to the Section 936 credit. The first option will limit the credit against such
income to 40% of the credit allowable under then current law, with a five year
phase-in period starting at 60% of the allowable credit. The second option was a
wage and depreciation based credit. Additional amendments to Section 936 in 1996
imposed caps on these credits, beginning in 1998 for the first option and
beginning in 2002 for the second option. More importantly, the 1996 amendments
eliminated both options for taxable years beginning in 2006. The eventual
elimination of tax benefits to those U.S. companies with operations in Puerto
Rico may lead to slower growth in the future. There can be no assurance that
this will not lead to a weakened economy, a lower rating on Puerto Rico's debt
or lower prices for Puerto Rican bonds that may be held by the Portfolio in the
long-term. Short-term affects are minimal.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. Puerto Ricans voted to retain Commonwealth
status, leaving intact the current relationship with the federal goverment.
There can be no assurance that the statehood issue will not be brought to a vote
in the future. A successful statehood vote in Puerto Rico would then require the
U.S. Congress to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. In 1996,
unemployment stood at 13.8%. The tourism industry is economically sensitive
and would likely be adversely affected by a recession in either the United
States or Europe.
An important component of the USVI revenue base is the federal excise tax on
rum exports. Tax revenues rebated by the federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI is periodically hit by hurricanes.
Several hurricanes have caused extensive damage, and a drop in tourism, which
has had a negative impact on revenue collections. There is currently no rated,
unenhanced Virgin Islands debt outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. The
Naval Air Station, one of several U.S. military facilities on the island, has
been slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the Island's
commercial airport. Guam is also heavily reliant on tourists, particularly the
Japanese. For 1995, the government realized a General Fund operating surplus.
The administration has taken steps to improve its financial position; however,
there are no guarantees that an improvement will be realized. Guam's general
obligation debt is rated BBB by S&P with a negative outlook.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the government issuer) have
evolved as a means for government issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an on-going basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by 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 municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by the
Portfolio.
SHORT-TERM TRADING
The Portfolio may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase and later sell securities
in anticipation of a market rise (a decline in interest rates). In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Portfolio believes to be a temporary disparity in the
normal yield relationship between the two securities. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the overall
demand for or supply of various types of municipal obligations or changes in the
investment objectives of investors. Such trading may be expected to increase the
portfolio turnover rate, which may increase capital gains and the expenses
incurred in connection with such trading. The Portfolio anticipates that its
annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less). 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. For the Portfolio turnover rate of the Portfolio, see "Supplementary
Data" in the Portfolio's financial statements included in the Fund's annual
report.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of 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 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 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 1940 Act 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. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations 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. Because this right is assignable with the security, which is
readily marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
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. Interest income generated by
certain bonds having put or demand features may not qualify as tax-exempt
interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. The Portfolio
would have the right to call a loan and obtain the securities loaned at any time
on up to five business days' notice. During the existence of a loan, the
Portfolio will continue to receive the equivalent of the interest paid by the
issuer on the securities loaned and will also receive a fee, or all or a portion
of the interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. The Portfolio would not have the right
to vote any securities having voting rights during the existence of the loan,
but would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be of
good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, net of
administration expenses and other finder's fees, 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.
FUTURES CONTRACTS AND OPTIONS ON 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, the Portfolio may enter into (i)
futures contracts for the purchase or sale of debt securities, and (ii) futures
contracts on securities indices. All futures contracts entered into by 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. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. 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 Code for maintaining qualification of
the Fund as a regulated investment company for federal income tax purposes (see
"Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or futures
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid
securities in a segregated account with its custodian in the prescribed amount.
The securities in the segregated account will be marked to market daily. Assets
used as cover or held in a segregated account maintained by the custodian cannot
be sold while the position requiring coverage or segregation is outstanding
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Portfolio's assets to segregated accounts
or cover could impede portfolio management or the Portfolio's ability to meet
redemption requests or other current obligations.
SHORT-TERM OBLIGATIONS
Although the Portfolio will normally attempt to invest substantially all of
its assets in municipal 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, AMT and/or State
taxes. Such short-term taxable obligations may include, but are not limited to,
certificates of deposit, commercial paper, short-term notes and obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. During periods of adverse market conditions, the Portfolio
may temporarily invest more than 20% of its assets in such short-term taxable
obligations, all of which will be high quality.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund 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 SAI 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. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
lnvestment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest or
deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, or (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.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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.
The Fund and the Portfolio have also adopted the following investment
policies which may be changed by the Trust with respect to the Fund without
approval by the Fund's shareholders or with respect to the Portfolio by the
Trustees of the Portfolio without the approval of the Fund or its other
investors. As a matter of nonfundamental policy, the Fund and the Portfolio will
not: (a) engage in options, futures or forward transactions if more than 5% of
its net assets, as measured by the aggregate of the premiums paid by the Fund or
the Portfolio, would be so invested; (b) make short sales of securities or
maintain a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short, and unless
not more than 25% of the Fund's net assets (taken at current value) is held as
collateral for such sales at any one time. (The Fund and the Portfolio will make
such sales only for the purpose of deferring realization of gain or loss for
federal income tax purposes); or (c) invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements maturing in more than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or its delegate, determines to be
liquid.
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 Investment Adviser on the basis of the characteristics of
the obligation and other relevant factors, the most significant of which is the
source of funds committed to meeting interest and principal payments of such
obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change below investment grade made by a rating service, will not compel the Fund
or the Portfolio, as the case may be, to dispose of such security or other
asset. Where applicable and notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 65% of total assets in a particular state.
Moreover, the Fund and Portfolio must always be in compliance with the borrowing
policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the 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 Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust and the Portfolio as defined in the 1940
Act by virtue of their affiliation with Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected 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 (40), Vice President
Vice President of BMR since August 11, 1992 and of Eaton Vance and EV, and
employee of Eaton Vance since March 8, 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 (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March 27,
1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary on June 19,
1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Fund's Part II.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the 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. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in the Fund's Part II.
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 over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion.
The following persons manage one or more of the Eaton Vance limited maturity
municipal portfolios. For the identity of the Portfolio's portfolio manager, see
the Fund's current Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr.
Ahern graduated from Boston College in 1981 with a B.A. in Economics, and
received his M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern
is a member of the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
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 any litigation,
proceedings and claims and any legal obligation of the Portfolio to indemnify
its Trustees, officers and investors with respect thereto, to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. 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.
The Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. 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. 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, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with 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 Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with any litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
BMR, Eaton Vance and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or officers and Directors of EVC and EV. As
of July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Dynner and Hawkes are
officers or Trustees of the Trust and the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Browse, Fetter,
MacIntosh, Murphy, O'Connor and Woodbury and Ms. Anderes, Ms. Clemson and Ms.
Sanders are officers of the Trust and/or the Portfolio and are also members of
the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns 22% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in precious metal mining venture investment and management. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the 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.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of other
entities in the Eaton Vance organization, owns approximately 13% of the voting
stock of Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Fund or Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal, may require the
recognition of taxable gain or loss. Income dividends and capital gains
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in a
period of declining market prices. A shareholder may not have a withdrawal plan
in effect at the same time he or she has authorized Bank Automated Investing or
is otherwise making regular purchases of Fund shares. The shareholder, the
Transfer Agent or the Principal Underwriter will be able to terminate the
withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of 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 municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transaction prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchased on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Taxable obligations for which price
quotations are readily available normally will be valued at the mean between the
latest available bid and asked prices. Open futures positions on debt securities
are valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees of the Portfolio. Other assets are valued at fair value
using methods determined in good faith by or at the direction of the Trustees of
the Portfolio. The Fund and the Portfolio will be closed for business and will
not price their respective shares or interests on the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the results. The calculation
assumes that all 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 CDSC at the end of the
period. For further information concerning the total return of the Fund, see
"Performance Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent thirty-day period by the
maximum offering price (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 distributions during the period.
This yield figure does not reflect the deduction of any CDSC which is 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 one minus a stated rate. For the
yield and taxable-equivalent yield of the Fund, see "Performance Information" in
the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
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 (the days in a year divided by the accrual days of the monthly period)
used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and
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.
The Fund may provide investors with information on municipal bond investing,
which may include comparative performance information, evaluations of Fund
performance, charts and/or illustrations prepared by independent sources (such
as Lipper Analytical Services Inc., CDA/Wiesenberger, Morningstar, Inc., The
Bond Buyer, the Federal Reserve Board or The Wall Street Journal). The Fund may
also refer in investor publications to Tax Freedom Day, as computed by the Tax
Foundation, Washington, DC 20005, to help illustrate the value of tax free
investing, as well as other tax-related information. Information, charts and
illustrations showing the effects of inflation and taxes (including their effect
on the dollar and the return on various investments) and compounding earnings
may also be included in advertisements and materials furnished to present and
prospective investors.
Information about portfolio allocation and holdings of 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.
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. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after-tax yield (or value) of
such other investment vehicles. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its
ordinary income (including tax-exempt income) and net income (after reduction by
any available capital loss carryforwards) in accordance with the timing
requirements imposed by the Code, so as to maintain its RIC status and to avoid
paying any federal income or excise tax. The Fund so qualified for its fiscal
year ended March 31, 1997. Because the Fund invests its assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to also satisfy these
requirements. 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 RIC, the Fund
(i) will be deemed to own its proportionate share of each of the assets of the
Portfolio and (ii) will be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income (not including
tax-exempt income) for such year, at least 98% of its capital gain net income
(which is the excess of its realized capital gains over its realized capital
losses), generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards and 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 RIC
and the Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
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 securities that it might otherwise have continued to hold
in order to generate cash that the Fund may withdraw from the Portfolio to make
distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto. The
Code is not entirely clear regarding the federal income tax consequences of the
Fund's taking certain positions in connection with ownership of such distressed
securities. For example, the Code is unclear regarding: (i) when the Portfolio
may cease to accrue interest, original issue discount, or market discount; (ii)
when and to what extent deductions may be taken for bad debts or worthless
securities; (iii) how payments received on obligations in default should be
allocated between principal and income; and (iv) whether exchanges of debt
obligations in a workout context are taxable.
Distributions by 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 under Code Section
103(a). For purposes of applying this 50% requirement, the Fund will be deemed
to own its proportionate share of each of the assets of the Portfolio, and the
Portfolio currently intends to invest its assets in a manner such that the Fund
can meet this 50% requirement. Interest on certain municipal obligations is
treated as a tax preference item for purposes of the AMT. Shareholders of 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 discount with respect to certain stripped municipal obligations or
their stripped coupons and certain realized gains or income attributable to
accrued market discount. Any distributions by the Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the Portfolio and allocated to the Fund. Certain
distributions of the Fund, if declared in October, November or December and paid
the following January, may be taxed to shareholders as if received on December
31 of the year in which they are declared.
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 periods of Portfolio securities,
and conversion of short-term capital losses 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 RIC status for federal income tax
purposes.
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 disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax convention. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local and, where applicable, foreign tax
consequences of investing in 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 Authorized Firms or investors and other selling
literature and of advertising are borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its 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 the noninterested
Trustees 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.
DISTRIBUTION PLAN
The Plan applicable to Class I shares is designed to meet the requirements
of Rule 12b-1 under the 1940 Act and the sales charge rule of the NASD. The
purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund.
The 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 Fund shares
(excluding reinvestment of distributions), the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 3% in the case
of the California, Florida, Massachusetts, New Jersey, New York and Pennsylvania
Funds and 3.5% in the case of the Connecticut, Michigan and Ohio Funds of the
amount received 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 amount payable by the 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 shares and will accordingly reduce
the net assets of the Class I shares upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day by the
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 the 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 held by its
corresponding Portfolio, the expenses of the Fund attributable to Class I shares
and of its corresponding Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of its corresponding Portfolio accrued and
allocated to the Fund on such day, and any dividends and distributions declared
on the Class I shares. The Fund does not accrue possible future payments as a
liability of Class I shares or reduce its current net assets of the Class I
shares in respect of unknown amounts which may become payable under its Plan in
the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund on behalf of Class I shares to the Principal
Underwriter and CDSCs 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 CDSC will be imposed, the level and timing of redemptions of Class I
shares upon which no CDSC will be imposed (including redemptions of Class I
shares pursuant to the exchange privilege 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. 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 CDSCs will tend to increase the time
during which there will exist uncovered distribution charges of the Principal
Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal, .90% of the Fund's average daily net assets per annum.
For actual 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. The Fund believes that the combined rate of all
these payments may be higher than the rate of payments made under distribution
plans adopted by other investment companies pursuant to Rule 12b-1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions at the time of sale, it is anticipated that the Eaton
Vance organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from the sale of Class I shares and through the
amounts paid to the Principal Underwriter, including CDSCs pursuant to the Plan.
The Eaton Vance organization may be considered to have realized a profit under
the Plan if at any point in time the aggregate amounts theretofore received by
the Principal Underwriter under to the Plan and from CDSCs 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.
Pursuant to Rule 12b-1, the Plan has been approved by the Board of Trustees
of the Trust. The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time with respect to one or more classes of
shares of the Fund by a vote of a majority of the Rule 12b-1 Trustees or by a
vote of a majority of the outstanding voting securities of that class. The Plan
requires quarterly Trustee review of a written report of the amount expended
under the Plan and the purposes for which such expenditures were made. The Plan
may not be amended to increase materially the payments described therein without
approval of the shareholders of the affected class of the Fund and the Trustees.
So long as the Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the 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 of the Trust 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 commission or spread, 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 compensation 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 NASD, which rule provides that no firm which is
a member of the NASD shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the 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.
OTHER INFORMATION
The Trust is organized as a Massachusetts business trust under a Declaration
of Trust dated October 23, 1985, as amended, and was originally called Eaton
Vance California Municipals Trust. The Trust changed its name to Eaton Vance
Investment Trust on April 28, 1992. Eaton Vance, pursuant to its agreement with
the Trust, controls the use of the words "Eaton Vance" and "EV" in the Fund's
name and may use the words "Eaton Vance" or "EV" in other connections and for
other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
In accordance with the Declaration of Trust of 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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless removed
by action of the investors in accordance with the Portfolio's Declaration of
Trust, the Trustees shall continue to hold office and may appoint successor
Trustees.
The Declaration of Trust of 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.
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.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
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 Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended March 31,
1997, as previously filed electronically with the Commission:
EV Marathon California Limited Maturity Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
California Limited Maturity Municipals Fund
Connecticut Limited Maturity Municipals Fund
Florida Limited Maturity Municipals Fund
Massachusetts Limited Maturity Municipals Fund
Michigan Limited Maturity Municipals Fund
New Jersey Limited Maturity Municipals Fund
New York Limited Maturity Municipals Fund
Ohio Limited Maturity Municipals Fund
Pennsylvania Limited Maturity Municipals Fund
(Accession No. 0000950146-97-000905)
<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.
- ----------
+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.
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 to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
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, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk 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
that 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: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. 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 CALIFORNIA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain California considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in California issuers. Such information supplements the information in the
Prospectus and 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
California issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Economic Factors
Fiscal Years Prior to 1996-97. By the close of the 1989-90 Fiscal Year,
California's revenues had fallen below projections so that the State's budget
reserve, the Special Fund for Economic Uncertainties (the "Special Fund"), was
fully depleted by June 30, 1990. A recession which had begun in mid-1990,
combined with higher health and welfare costs driven by the State's rapid
population growth, adversely affected General Fund revenues and raised
expenditures above initial budget appropriations.
As a result of these factors and others, the State confronted a period of
budget imbalance. Beginning with the 1990-91 Fiscal Year and for several years
thereafter, the budget required multibillion dollar actions to bring projected
revenues and expenditures into balance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in the Special Fund -- approaching $2.8 billion at
its peak on June 30, 1993.
By the 1993-94 Fiscal Year, the accumulated deficit was too large to be
prudently retired in one year and a two-year program was implemented. This
program used revenue anticipation warrants to carry a portion of the deficit
over to the end of the fiscal year.
The 1994-95 Budget Act projected General Fund revenues and transfers of
$41.9 billion. Expenditures were projected to be $40.9 billion -- an increase of
$1.6 billion over the prior year. As a result of the improving economy, however,
the fiscal year ultimately produced revenues and transfers of $42.7 billion
which more than offset expenditures of $42.0 billion and thereby reduced the
accumulated budget deficit.
With strengthening revenues and reduced caseload growth driven by an
improving economy, the State entered the 1995-96 Fiscal Year budget negotiations
with the smallest nominal "budget gap" to be closed in many years. The 1995-96
Budget Act projected General Fund revenues and transfers of $44.1 billion, a
3.5% increase from the prior year, and expenditures were budgeted at $43.4
billion. In addition, the Department of Finance projected that after repaying
the last of the carryover budget deficit, there would be a positive balance of
$28 million in the budget reserve as of June 30, 1996.
1996-97 Fiscal Year. The 1996-97 Governor's Budget, released January 10, 1996,
projected General Fund revenues and transfers of $45.6 billion, a 1.3% increase
over 1995-96. The Governor's budget proposed two major initiatives, a 15%
personal and corporate income tax cuts and a revision of the trial court funding
program, which would have the effect of reducing General Fund revenues. The
Governor's Budget proposed General Fund expenditures of $45.2 billion. The
Governor's Budget also proposed Special Fund revenues equal to expenditures, at
a level of $13.3 billion.
The May Revision of the Governor's Budget, released on May 21, 1996 ("The
May Revision"), updated revenue estimates for the 1996-97 Fiscal Year,
reflecting stronger economic activity in the State and thus greater revenue
growth. The revised estimate was for $47.1 billion of revenues, still assuming
the Governor's tax cut would be enacted, and $46.5 billion of expenditures.
1996-97 Budget Act. The 1996-97 Budget Act was signed by the Governor on July
15, 1996, along with various implementing bills. The Governor vetoed about $82
million of appropriations (both General Fund and Special Fund). With the signing
of the Budget Act, the State implemented its regular cash flow borrowing program
with the issuance of $3.0 billion of Revenue Anticipation Notes to mature on
June 30, 1997. The Budget Act appropriates a budget reserve in the Special Fund
of $305 million, as of June 30, 1997. The Department of Finance projects that,
on June 30, 1997, the State's available borrowable (cash) resources will be $2.9
billion, after payment of all obligations due by that date, so that no
cross-fiscal year borrowing is anticipated.
Revenues -- The Legislature rejected the Governor's proposed 15% cut in
personal income taxes (to be phased in over three years), approved a 5% cut in
bank and corporation taxes, to be effective for income years commencing on
January 1, 1997. As a result of the Legislature's failure to enact the personal
income tax cut, revenues for the Fiscal Year are estimated to be $550 million
higher than projected in the May Revision, and are now estimated to total
$47.643 billion, a 3.3 percent increase over the final estimated 1995-96
revenues. Special Fund revenues are estimated to be $13.3 billion.
Expenditures -- The Budget Act contains General Fund appropriations totaling
$47.251 billion, a 4.0% increase over the final estimated 1995-96 expenditures.
Special Fund expenditures are budgeted at $12.6 billion.
The following are principal features of the 1996-97 Budget Act:
1. Proposition 98 funding for schools and community college districts
increased by almost $1.6 billion (General Fund) and $1.65 billion above
revised 1995-96 levels. Almost half of this money was budgeted to fund
class-size reductions in kindergarten and grades 1-3. Also, for the second
consecutive year, the full cost of living allowance (3.2 percent) was
funded. Proposition 98 increases have brought K-12 expenditures to almost
$4,800 per pupil (also called ADA, or Average Daily Attendance), an almost
15% increase over the level prevailing during the recession years. Out of
this $1.6 billion total community colleges will receive an increase in
funding of $157 million for 1996-97.
Due to higher than projected revenues in 1995-96, an additional $1.1
billion ($190 per K-12 ADA and $145 million for community colleges) was
appropriated and retroactively applied towards the 1995-96 Proposition 98
guarantee, bringing K-12 expenditures in that year to over $4,600 per ADA.
Similar retroactive increases totaling $230 million, based on final figures
on revenues and State population growth, were made to the 1991-92 and the
1994-95 Proposition 98 guarantees, most of which was allocated to each
school site.
2. The Budget Act assumed savings of approximately $660 million in
health and welfare costs which required changes in federal law, including
federal welfare reform. The Budget Act further assumed federal law changes
in August 1996 which would allow welfare cash grant levels to be reduced by
October 1, 1996. These cuts totaled approximately $163 million of the
anticipated $660 million savings. See "Federal Welfare Reform."
3. A 4.9% increase in funding for the University of California ($130
million General Fund) and the California State University system ($101
million General Fund), with no increases in student fees.
4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health care
costs of illegal immigrants. These funds reduce appropriations in these
categories that would otherwise have to be paid from the General Fund. (For
purposes of cash flow projections, the Department of Finance expects $540
million of this amount to be received during the 1996-97 fiscal year.)
5. General Fund support for the Department of Corrections was increased
by about 7% over the prior year, reflecting estimates of increased prison
population.
6. With respect to aid to local governments, the principal new programs
included in the Budget Act are $100 million in grants to cities and counties
for law enforcement purposes, and budgeted $50 million for competitive
grants to local governments for programs to combat juvenile crime.
The Budget Act did not contain any tax increases. As noted, there was a
reduction in bank and corporate taxes. In addition, the Legislature approved
another one-year suspension of the Renters Tax Credit, saving $520 million in
expenditures.
Federal Welfare Reform -- Following enactment of the 1996-97 Budget Act,
Congress passed and the President signed (on August 22, 1996) the Personal
Responsibility and Work Opportunity Act of 1996 (P.L. 104-193, the "Law") making
a fundamental reform of the current welfare system. Among many provisions, the
Law includes: (i) conversion of Aid to Families with Dependent Children from an
entitlement program to a block grant titled Temporary Assistance for Needy
Families (TANF), with lifetime time limits on TANF recipients, work requirements
and other changes; (ii) provisions denying certain federal welfare and public
benefits to legal noncitizens, allowing states to elect to deny additional
benefits (including TANF) to legal noncitizens, and generally denying almost all
benefits to illegal immigrants; and (iii) changes in the Food Stamp program,
including reducing maximum benefits and imposing work requirements.
The Law requires states to implement the new TANF program not later than
July 1, 1997 and provides California approximately $3.7 billion in block grant
funds for fiscal year 1996-97. States are allowed to implement TANF as soon as
possible and will receive a prorated block grant effective the date of
application. The California State Plan is to be submitted in time to allow grant
reductions to be implemented effective January 1, 1997 (allowing $92 million of
the $163 million referred to in paragraph 2 above to be saved) and to allow the
State to capture approximately $267 million in additional federal block grant
funds over the currently budgeted level. None of the other federal changes
needed to achieve the balance of the $660 million cost savings were enacted.
Thus in lieu of the $660 million savings initially assumed to be saved, it is
now projected that savings will total approximately $360 million.
A preliminary analysis of the Law by the Legislative Analyst's Office
indicated that an overall assessment of how these changes will affect the
State's General Fund will not be known for some time, and will depend on how the
State implements the Law. There are many choices including how quickly the State
implements the Law; the degree to which the State elects to make up for cuts in
federal aid; provide more aid to counties, or cut some of its own existing
programs for noncitizens; and the State's ability to avoid certain penalties
written into the Law.
1997-98 Fiscal Year Proposed Budget. On January 9, 1997, the Governor released
his proposed budget for the 1997-98 Fiscal Year (the "Governor's Budget"). The
Governor's Budget projects General Fund revenues and transfers in 1997-98 of
$50.7 billion, a 4.6% increase from revised 1996-97 figures. The Governor
proposes expenditures of $50.3 billion, a 3.9% increase from 1996-97. The
Governor's Budget projects a balance in the SFEU of $553 million on June 30,
1998. The Governor's Budget also anticipates about $3 billion of external
borrowing for cash flow purposes during the year, with no requirement for
cross-fiscal year borrowing.
Among the major initiatives and features of the Governor's Budget are the
following:
1. A proposed 10% cut in the Bank and Corporation Tax rate, to be
phased in over two years.
2. Proposition 98 funding for K-14 schools will be increased again, as a
result of stronger revenues. Per-pupil funding for K-12 schools will reach
$5,010, compared to $4,220 as recently as the 1993-94 Fiscal Year. Part of
the new funding is proposed to be dedicated to the completion of the current
program to reduce class size to 20 pupils in lower elementary grades, and to
expand the program by one grade, so that it will cover K-3rd grade.
3. Funding for higher education will be increased consistent with a
four-year "compact" established in 1995-96. There is not projected to be any
increase in student fees at any of the three levels of the State higher
education system.
4. The 1997-98 proposed Governor's Budget assumes approximately $500
million in savings contingent upon federal action. The Budget assumes that
federal law will be enacted to remove the maintenance-of-effect requirement
for Supplemental Security Income (SSI) payments, thereby enabling the state
to reduce grant levels pursuant to previously enacted state law ($279
million). The Budget also assumes the federal government will fund $216
million in costs of health care for illegal immigrants.
The Orange County Bankruptcy. On December 6, 1994, Orange County, California
and its Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the
United States Bankruptcy Code. The subsequent restructuring led to the sale of
substantially all of the Pool's portfolio and resulted in losses estimated to be
approximately $1.7 billion (or approximately 22% of amounts deposited by the
Pool investors). Approximately 187 California public entities -- substantially
all of which are public agencies within the county -- had various bonds, notes
or other forms of indebtedness outstanding. In some instances the proceeds of
such indebtedness were invested in the Pool.
In April, 1996, the County emerged from bankruptcy after closing on a $900
million recovery bond deal. At that time, the County and its financial advisors
stated that the County had emerged from the bankruptcy without any structural
fiscal problems and assured that the County would not slip back into bankruptcy.
However, for many of the cities, schools and special districts that lost money
in the County portfolio, repayment remains contingent on the outcome of
litigation which is pending against investment firms and other finance
professionals. Thus, it is impossible to determine the ultimate impact of the
bankruptcy and its aftermath on these various agencies and their claims.
Constitutional, Legislative and Other Factors
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
the adverse effects described below, among others.
Revenue Distribution. Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on California State
revenues for payment of these obligations. Property tax revenues and a portion
of the State's general fund surplus are distributed to counties, cities and
their various taxing entities and the State assumes certain obligations
theretofore paid out of local funds. Whether and to what extent a portion of the
State's general fund will be distributed in the future to counties, cities and
their various entities is unclear.
Health Care Legislation. Certain Debt Obligations in the Portfolio may be
obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect these
revenues and, consequently, payment on those Debt Obligations.
The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only those
hospitals which enter into a Medi-Cal contract with the State of California will
be paid for non-emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice under
certain circumstances and is obligated to make contractual payments only to the
extent the California legislature appropriates adequate funding therefor.
California enacted legislation in 1982 that authorizes private health plans
and insurers to contract directly with hospitals for services to beneficiaries
on negotiated terms. Some insurers have introduced plans known as "preferred
provider organizations" ("PPOs"), which offer financial incentives for
subscribers who use only the hospitals which contract with the plan. Under an
exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for "multi-level"
facilities at a reserve level consistent with those that would be required by an
insurance company.
Mortgages and Deeds. Certain Debt Obligations in the Portfolio may be
obligations which are secured in whole or in part by a mortgage or deed of trust
on real property. California has five principal statutory provisions which limit
the remedies of a creditor secured by a mortgage or deed of trust. Two statutes
limit the creditor's right to obtain a deficiency judgment, one limitation being
based on the method of foreclosure and the other on the type of debt secured.
Under the former, a deficiency judgment is barred when the foreclosure is
accomplished by means of a nonjudicial trustee's sale. Under the latter, a
deficiency judgment is barred when the foreclosed mortgage or deed of trust
secures certain purchase money obligations. Another California statute, commonly
known as the "one form of action" rule, requires creditors secured by real
property to exhaust their real property security by foreclosure before bringing
a personal action against the debtor. The fourth statutory provision limits any
deficiency judgment obtained by a creditor secured by real property following a
judicial sale of such property to the excess of the outstanding debt over the
fair value of the property at the time of the sale, thus preventing the creditor
from obtaining a large deficiency judgment against the debtor as the result of
low bids at a judicial sale. The fifth statutory provision gives the debtor the
right to redeem the real property from any judicial foreclosure sale as to which
a deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power of
sale contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days after
expiration of the three-month reinstatement period. The debtor may reinstate the
mortgage, in the manner described above, up to five business days prior to the
scheduled sale date. Therefore, the effective minimum period for foreclosing on
a mortgage could be in excess of seven months after the initial default. Such
time delays in collections could disrupt the flow of revenues available to an
issuer for the payment of debt service on the outstanding obligations if such
defaults occur with respect to a substantial number of mortgages or deeds of
trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such private
sale to constitute "state action," and could hold that the private-
right-of-sale proceedings violate the due process requirements of the Federal or
State Constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain Debt Obligations in the Portfolio may be obligations which finance
the acquisition of single family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage loans
may be imposed only with respect to voluntary prepayments made during the first
five years during the term of the mortgage loan, and then only if the borrower
prepays an amount in excess of 20% of the original principal amount of the
mortgage loan in a 12-month period; a prepayment charge cannot in any event
exceed six months' advance interest on the amount prepaid during the 12-month
period in excess of 20% of the original principal amount of the loan. This
limitation could affect the flow of revenues available to an issuer for debt
service on the outstanding debt obligations which financed such home mortgages.
Proposition 13. Certain of the Debt Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem tax on
real property to 1% of full cash value to be collected by the counties and
apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under "full cash
value" or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
Legislation enacted by the California Legislature to implement Article XIIIA
provides that notwithstanding any other law, local agencies may not levy any ad
valorem property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum tax
permitted by Article XIIIA.
Proposition 9. On November 6, 1979, an initiative known as "Proposition 9"
or the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIIIB does not affect
the appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general terms, the "appropriations
limit" is required to be based on certain 1978/79 expenditures, and is to be
adjusted annually to reflect changes in consumer prices, population, and certain
services provided by these entities. Article XIIIB also provides that if these
entities' revenues in any year exceed the amounts permitted to be spent, the
excess is to be returned by revising tax rates or fee schedules over the
subsequent two years.
Proposition 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools
are guaranteed the greater of (a) in general, a fixed percent of General Fund
revenues ("Test 1"), (b) the amount appropriated to K-14 schools in the prior
year, adjusted for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment ("Test 2"), or
(c) a third test, which would replace Test 2 in any year when the percentage
growth in per capita General Fund revenues from the prior year plus one half of
one percent is less than the percentage growth in State per capita personal
income ("Test 3"). Under Test 3, schools would receive the amount appropriated
in the prior year adjusted for changes in enrollment and per capita General Fund
revenues, plus an additional small adjustment factor. If Test 3 is used in any
year, the difference between Test 3 and Test 2 would become a "credit" to
schools which would be the basis of payments in future years when per capita
General Fund revenue growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature -- by two-thirds vote of both houses,
with the Governor's concurrence -- to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. In 1992, a lawsuit was filed, California Teachers'
Association v. Gould, which challenged the validity of these off-budget loans.
During the course of this litigation, a trial court determined that almost $2
billion in "loans" which had been provided to school districts during the
recession violated the constitutional protection of support for public
education. A settlement was reached on April 12, 1996 which ensures that future
school funding will not be in jeopardy over repayment of these so-called loans.
Proposition 111. On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July 1,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the State and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
Proposition 62. On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative provided the
following:
1. Requires that any tax for general governmental purposes imposed by local
governments be approved by resolution or ordinance adopted by a two-thirds vote
of the governmental entity's legislative body and by a majority vote of the
electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other than
general governmental purposes) imposed by a local governmental entity be
approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes or for
the service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA;
5. Prohibits the imposition of transaction taxes and sales taxes on the
sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after August
1, 1985 be ratified by a majority vote of the electorate within two years of
the adoption of the initiative;
7. Requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of property tax revenue
allocated to such local government occurs in an amount equal to the revenues
received by such entity attributable to the tax levied in violation of the
initiative; and
8. Permits these provisions to be amended exclusively by the voters of the
State of California.
In September 1988, the California Court of Appeal in City of Westminster v.
County of Orange, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511 (Cal.Ct.App. 1988),
held that Proposition 62 is unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and prior
to the effective date of Proposition 62, to be subject to approval by a majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is impossible to predict the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62. The California Court of
Appeal in City of Woodlake v. Logan, (1991) 230 Cal.App.3d 1058, subsequently
held that Proposition 62's popular vote requirements for future local taxes also
provided for an unconstitutional referenda. The California Supreme Court
declined to review both the City of Westminster and the City of Woodlake
decisions.
In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28, 1995)
11 Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e, the
California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes, and specifically disapproved of the
City of Woodlake decision as erroneous. The Court did not determine the
correctness of the City of Westminster decision, because that case appeared
distinguishable, was not relied on by the parties in Guardino, and involved
taxes not likely to still be at issue. It is impossible to predict the impact of
the Supreme Court's decision on charter cities or on taxes imposed in reliance
on the City of Woodlake case.
Senate Bill 1590 (O'Connell), introduced February 16, 1996, would make the
Guardino decision inapplicable to any tax first imposed or increased by an
ordinance or resolution adopted before December 14, 1995. The California State
Senate passed the Bill on May 16, 1996 and it is currently pending in the
California State Assembly. It is not clear whether the Bill, if enacted, would
be constitutional as a non-voted amendment to Proposition 62 or as a non-voted
change to Proposition 62's operative date.
Proposition 218. On November 5, 1996, the voters of the State approved
Proposition 218, a constitutional initiative, entitled the "Right to Vote on
Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and XIII D
to the California Constitution and contains a number of interrelated provisions
affecting the ability of local governments to levy and collect both existing and
future taxes, assessments, fees and charges. Proposition 218 became effective on
November 6, 1996. The Sponsors are unable to predict whether and to what extent
Proposition 218 may be held to be constitutional or how its terms will be
interpreted and applied by the courts. However, if upheld, Proposition 218 could
substantially restrict certain local governments' ability to raise future
revenues and could subject certain existing sources of revenue to reduction or
repeal, and increase local government costs to hold elections, calculate fees
and assessments, notify the public and defend local government fees and
assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for the
imposition, extension or increase of general taxes and two-thirds voter approval
for the imposition, extension or increase of special taxes, including special
taxes deposited into a local government's general fund. Proposition 218 also
provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the initiative
power to give voters the power to reduce or repeal local taxes, assessments,
fees and charges, regardless of the date such taxes, assessments, fees or
charges were imposed. This extension of the initiative power to some extent
constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v.
Brown, which upheld an initiative that repealed a local tax and held that the
State constitution does not preclude the repeal, including the prospective
repeal, of a tax ordinance by an initiative, as contrasted with the State
constitutional prohibition on referendum powers regarding statutes and
ordinances which impose a tax. Generally, the initiative process enables
California voters to enact legislation upon obtaining requisite voter approval
at a general election. Proposition 218 extends the authority stated in Rossi v.
Brown by expanding the initiative power to include reducing or repealing
assessments, fees and charges, which had previously been considered
administrative rather than legislative matters and therefore beyond the
initiative power.
The initiative power granted under Article XIII C of Proposition 218, by its
terms, applies to all local taxes, assessments, fees and charges and is not
limited to local taxes, assessments, fees and charges that are property related.
Article XIII D of Proposition 218 adds several new requirements making it
generally more difficult for local agencies to levy and maintain "assessments"
for municipal services and programs. "Assessment" is defined to mean any levy or
charge upon real property for a special benefit conferred upon the real
property.
Article XIII D of Proposition 218 also adds several provisions affecting
"fees" and "charges" which are defined as "any levy other than an ad valorem
tax, a special tax, or an assessment, imposed by a local government upon a
parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available to the public at large in substantially the same manner as
it is to property owners. Further, before any property related fee or charge may
be imposed or increased, written notice must be given to the record owner of
each parcel of land affected by such fee or charges. The local government must
then hold a hearing upon the proposed imposition or increase of such property
based fee, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the local government may not
impose or increase the fee or charge. Moreover, except for fees or charges for
sewer, water and refuse collection services, no property related fee or charge
may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds
voter approval by the electorate residing in the affected area.
Proposition 87. On November 8, 1988, California voters approved Proposition
87. Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit redevelopment
agencies from receiving any of the property tax revenue raised by increased
property tax rates levied to repay bonded indebtedness of local governments
which is approved by voters on or after January 1, 1989.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $43,194,441. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $239,320, $327,056 and $418,800, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $7,351 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $308,795 and the Principal Underwriter
received approximately $110,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$331,700. During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $69,292 for Class I shares and $3,448 for
Class II shares, of which $68,950 and $3,402, respectively, was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $765 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $26,519 and $5,129, respectively, on portfolio security
transactions, aggregating $208,919,974 and $45,929,788, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex:(1)
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $193 $ 941(2) $145,000(5)
Samuel L. Hayes, III .................... 174 1,132(3) 155,000(6)
Norton H. Reamer ........................ 172 1,074 145,000
John L. Thorndike ....................... 178 1,162(4) 148,750(7)
Jack L. Treynor ......................... 191 1,116 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $414 of deferred compensation.
(3) Includes $146 of deferred compensation.
(4) Includes $457 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Cynthia J. Clemson (34) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since May 1, 1997. Ms. Clemson has been a Vice President of BMR and
Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms. Clemson
is an officer of various investment companies managed by Eaton Vance or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 29, 1992 through March 31, 1997 and the one-year period ended March 31,
1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING CDSC DEDUCTING CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC*** --------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 5/29/92* $1,000 $1,230.89 $1,230.89 23.09% 4.39% 23.09% 4.39%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,029.91 $1,000.21 2.99% 2.99% 0.02% 0.02%
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.
- ------------
* Investment operations began on May 29, 1992.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.73%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.73% would be 6.01%, assuming a
combined federal and State tax rate of 37.90%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
Individual shareholders of the Fund who reside in California will not be
subject to California personal income tax on distributions received from the
Fund to the extent such distributions are attributable to interest on
obligations the interest on which is exempt under either federal or California
law from taxation by the State of California, provided that at least 50% of the
Portfolio's assets at the close of each quarter of its taxable year is invested
in such obligations. Distributions from the Fund which are attributable to
sources other than those in the preceding sentence will generally be taxable to
such individual shareholders as ordinary income. Distributions of the Fund's net
capital gains (the excess of net long-term capital gain over net short-term
capital loss) are taxable to shareholders as long-term capital gains which are
taxable at ordinary income rates for California personal income tax purposes. In
addition, distributions other than exempt-interest dividends are includable in
income subject to the California alternative minimum tax. Shares of the Fund
will not be subject to the California property tax.
Distributions of investment income and long-term and short-term capital
gains from the Fund will not be excluded from taxable income in determining
California corporate franchise tax for corporate shareholders. However,
distributions of the Fund's net capital gains are treated as long-term capital
gains for California corporate tax purposes. In addition, distributions may be
includable in income subject to the alternative minimum tax.
California tax law resembles federal tax law in restricting the
deductibility of interest on indebtedness incurred by shareholders to purchase
shares and the allowance of losses realized by a shareholder upon the sale or
redemption of shares.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 24.65% and 21.51%, respectively, of
the outstanding Class I and Class II shares, which it held on behalf of its
customers who are the beneficial owners of such shares, and as to which it has
voting power under certain limited circumstances. In addition, as of June 30,
1997, Smith Barney Inc. #00155709945, New York, NY 10013 owned beneficially and
of record 6.80% of the outstanding Class I shares of the Fund. To the knowledge
of the Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance California Limited Maturity Tax
Free Fund to EV Marathon California Limited Maturity Tax Free Fund on January
11, 1994 and to EV Marathon California Limited Maturity Municipals Fund on
December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the 1997 regular federal income tax
rates and California State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND CALIFORNIA STATE
SINGLE RETURN JOINT RETURN COMBINED TAX EXEMPT YIELD OF:
FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CA STATE --------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72
$ 59,751 - $124,650 $ 99,601 - $151,750 37.42 6.39 7.19 7.99 8.79 9.59 10.39 11.19
$124,651 - $271,050 $151,751 - $271,050 41.95 6.89 7.75 8.61 9.47 10.34 11.20 12.06
Over $271,050 Over $271,050 45.22 7.30 8.21 9.13 10.04 10.95 11.87 12.78
* Net amount subject to federal and California personal income tax after deductions and exemptions.
+ The combined tax brackets are calculated using the highest California State rate within the bracket. Taxpayers with taxable
income within each bracket may have a lower combined tax bracket and taxable equivalent yield than indicated above. The
combined tax brackets assume that California taxes are itemized deductions for federal income tax purposes. Investors who do
not itemize deductions on their federal income tax return will have a higher combined tax bracket and taxable equivalent yield
than those indicated above. The applicable federal tax rates within the brackets set forth above are 15%, 28%, 31%, 36% and
39.6% over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including California State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and California personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for California personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits that
may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON CONNECTICUT LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Connecticut considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in Connecticut issuers. Such information supplements the information in the
Prospectus and 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
Connecticut issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Connecticut's manufacturing industry, which has historically been of prime
economic importance to the State, its municipalities and its residents, has been
in decline for several years. Although Connecticut's manufacturing industry is
diversified between transportation equipment (primarily aircraft engines,
helicopters and submarines), non-electrical machinery, fabricated metal products
and electrical machinery, defense-related business represents a relatively high
proportion of manufacturing receipts. As a result, reductions in defense
spending have had a substantial adverse effect on Connecticut's manufacturing
industry.
Connecticut's manufacturing employment peaked in 1970 at over 441,000
workers but had declined 36.5% by 1995. Although the loss of manufacturing jobs
was partially offset by a 69.7% rise in other non-agricultural employment during
the same period, Connecticut's growth in non-manufacturing employment has lagged
behind the New England region and the nation as a whole. Moreover, Connecticut's
largest defense contractors have announced plans to reduce their labor forces
substantially over the next few years.
From 1986 through 1996, Connecticut's unemployment rate was generally lower
than the unemployment rate for the U.S. as a whole, and average per capita
personal income of Connecticut residents was higher than that of residents of
other states. The average unemployment rate (seasonally adjusted) in Connecticut
increased from a low of 3.0% in 1988 to 7.5% in 1992 and, after a number of
important changes in the method of calculation, was reported to be 5.0% in 1996.
Average per capita personal income of Connecticut residents increased in every
year from 1985 to 1995, rising from $18,268 to $31,776. However, pockets of
significant unemployment and poverty exist in some Connecticut cities and towns,
and Connecticut is now in a recession, the depth and duration of which are
uncertain.
For the four fiscal years ended June 30, 1991, the General Fund ran
operating deficits of approximately $115,600,000, $28,000,000, $259,000,000 and
$808,500,000, respectively. At the end of the 1990-1991 fiscal year, the General
Fund had an accumulated unappropriated deficit of $965,712,000. For the five
fiscal years ended June 30, 1996, the General Fund ran operating surpluses of
approximately $110,200,000, $113,500,000, $19,700,000, $80,500,000, and
$250,000,000, respectively. General Fund budgets for the biennium ending June
30, 1997, were adopted in 1995 and amended in 1996. General Fund expenditures
and revenues are budgeted to be approximately $9,200,000,000 for the 1996-1997
fiscal year.
In 1991, to address the General Fund's growing deficit, legislation was
enacted by which the State imposed an the income tax on individuals, trusts and
estates for taxable years generally commencing in 1992. For each fiscal year
starting with the 1991-1992 fiscal year, the General Fund has operated at a
surplus with over 60% of the State's tax revenues being generated by the income
tax and the sales and use tax. However, the State's budgeted expenditures have
almost doubled from approximately $4,300,000,000 for the 1986-1987 fiscal year
to approximately $9,200,000,000 for the 1996-1997 fiscal year.
The 1991 legislation also authorized the State Treasurer to issue Economic
Recovery Notes to fund the General Fund's accumulated deficit of $965,712,000 as
of June 30, 1991, and during 1991 the State issued a total of $965,710,000
Economic Recovery Notes, of which $196,555,000 were outstanding as of May 1,
1997. The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium ending June 30, 1997, payment of the
remaining notes scheduled to be paid during the 1995-96 fiscal year was
rescheduled to be paid over the four fiscal years ending June 30, 1999.
The State's primary method for financing capital projects is through the
sale of general obligation bonds. As of May 1, 1997, the State had authorized
general obligation bonds totaling $10,813,448,000, of which $9,673,240,000 had
been approved for issuance by the State Bond Commission, $8,797,072,000 had been
issued, and $6,384,716,267 were outstanding.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The improvements are to be financed by $18 million of general
obligation bonds of the State and $962 million bonds of the University. The
University's bonds will be secured by a State debt service commitment, the
aggregate amount of which is limited to $382 million for the four fiscal years
ending June 30, 1999, and $580 million for the six fiscal years ending June 30,
2005.
In addition to the bonds described above, the State also has limited or
contingent liability on a significant amount of other bonds. Such bonds have
been issued by the following quasi-public agencies: the Connecticut Housing
Finance Authority, the Connecticut Development Authority, the Connecticut Higher
Education Supplemental Loan Authority, the Connecticut Resources Recovery
Authority and the Connecticut Health and Educational Facilities Authority. Such
bonds have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of October 15, 1996, the amount of
bonds outstanding on which the State has limited or contingent liability totaled
$3,985,400,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2000, is currently estimated to be
$11.2 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $4.7 billion share of such cost by issuing $4.2 billion
of special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
As of October 15, 1996, the General Assembly had authorized $4,157,900,000
of such STO bonds, of which $3,594,700,000 new money borrowings had been issued.
It is anticipated that additional STO bonds will be authorized annually in
amounts necessary to finance and to complete the infrastructure program. Such
additional bonds may have equal rank with the outstanding bonds provided certain
pledged revenue coverage requirements are met. The State expects to continue to
offer bonds for this program.
On March 29, 1990, Standard and Poors reduced its ratings of the State's
general obligation bonds from AA+ to AA, and on April 9, 1990, Moody's reduced
its ratings from Aa1 to Aa. On September 13, 1991, Standard & Poors further
reduced its ratings of the State's general obligation bonds and certain
obligations that depend in part on the creditworthiness of the State to AA-. On
March 17, 1995, Fitch reduced its ratings of the State's general obligation
bonds from AA+ to AA.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of the
following cases might have a significant impact on the State's financial
position: (i) a class action by the Connecticut Criminal Defense Lawyers
Association claiming a campaign of illegal surveillance activity and seeking
damages and injunctive relief; (ii) an action on behalf of all persons with
traumatic brain injury, claiming that their constitutional rights are violated
by placement in State hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; and (iii) litigation involving claims by Indian
tribes to a portion of the State's land area.
As a result of litigation on behalf of black and Hispanic school children in
the City of Hartford seeking "integrated education" within the Greater Hartford
metropolitan area, on July 9, 1996, the State Supreme Court directed the
legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The fiscal impact of this decision
might be significant but is not determinable at this time.
General obligation bonds issued by municipalities are payable primarily from
ad valorem taxes on property located in the municipality. A municipality's
property tax base is subject to many factors outside the control of the
municipality, including the decline in Connecticut's manufacturing industry. In
addition to general obligation bonds backed by the full faith and credit of the
municipality, certain municipal authorities finance projects by issuing bonds
that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.
In recent years, certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits. The
most notable of these is the City of Bridgeport, which filed a bankruptcy
petition on June 7, 1991. The State opposed the petition. The United States
Bankruptcy Court for the District of Connecticut held that Bridgeport has
authority to file such a petition but that its petition should be dismissed on
the grounds that Bridgeport was not insolvent when the petition was filed.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $12,273,967. For the
fiscal years ended March 31, 1997, 1996 and 1995, absent a fee reduction, the
Portfolio would have paid BMR advisory fees of $64,492, $74,308 and $80,031,
respectively (equivalent to 0.47%, 0.46% and 0.45%, respectively, of the
Portfolio's average daily net assets for each such year). To enhance the net
income of the Portfolio for the fiscal years ended March 31, 1997 and 1996, BMR
made a reduction of its advisory fee in the amount of $32,497 and $53,054,
respectively. To enhance the net income of the Portfolio for the fiscal year
ended March 31, 1995, BMR made a reduction of 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 $8,932. The Portfolio's Investment Advisory
Agreement with BMR is dated April 9, 1993 and may be continued as described
under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal year ended March 31, 1995, $12,014 of the
Fund's operating expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $2,464 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $90,685 and the Principal Underwriter received
approximately $27,000 in CDSCs imposed on early redeeming shareholders. These
payments reduced uncovered distribution charges under the Plan. As at March 31,
1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $235,800. During
the fiscal year ended March 31, 1997, the Fund made service fee payments under
the Plan aggregating $16,626 for Class I shares, of which $16,438 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $222.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $11,480 and $1,257, respectively, on portfolio security
transactions aggregating $86,456,944 and $11,264,026, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $35 $35(2) $145,000(5)
Samuel L. Hayes, III .................... 31 31(3) 155,000(6)
Norton H. Reamer ........................ 31 31 145,000
John L. Thorndike ....................... 32 32(4) 148,750(7)
Jack L. Treynor ......................... 35 35 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $15 of deferred compensation.
(3) Includes $5 of deferred compensation.
(4) Includes $16 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from April 16, 1993 through March 31, 1997, and for the one-year period ended
March 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING CDSC DEDUCTING CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC*** ON --------------------------- --------------------------
PERIOD** DATE INVESTMENT 3/31/97 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---- ---------- ------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 4/16/93* $1,000 $1,143.59 $1,133.80 14.36% 3.45% 13.38% 3.22%
1 Year Ended
3/31/97 3/31/96 $1,000 $1,032.10 $1,002.28 3.21% 3.21% 0.23% 0.23%
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.
- ------------
* Investment operations began on April 16, 1993.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.00%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.00% would be 6.06%, assuming a
combined federal and State tax rate of 34.11%. If a portion of the Portfolio's
expenses had not been allocated to the Investment Adviser, the Fund would have
had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 30.55% and 19.54%, respectively, of
the outstanding Class I and Class II shares, which it held on behalf of its
customers who are the beneficial owners of such shares, and as to which it has
voting power under certain limited circumstances. In addition, as of June 30,
1997, NFSC FEBO #041-597368, John H. Woodruff MD, W. Hartford Dr., CT 06107 and
Holly Knight TTEE of the Holly Knight Separate Property Trust U/A/D 09/14/90,
Santa Monica, CA 90401 owned beneficially and of record 8.58% and 6.60%,
respectively, of the outstanding Class II shares of the Fund. To the knowledge
of the Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Connecticut Limited Maturity Tax
Free Fund to EV Marathon Connecticut Limited Maturity Tax Free Fund on August 1,
1994 and to EV Marathon Connecticut Limited Maturity Municipals Fund on December
15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Connecticut State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND CONNECTICUT STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CT STATE ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 18.25% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$ 59,751 - $124,650 $ 99,601 - $151,750 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$124,651 - $271,050 $151,751 - $271,050 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $271,050 Over $271,050 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
* Net amount subject to federal and Connecticut personal income tax after deductions and exemptions.
+ The combined federal and Connecticut tax brackets are calculated using the highest Connecticut tax rate within each bracket,
reduced by available tax credits. Taxpayers with taxable income within these brackets may have a lower combined tax bracket
and taxable equivalent yield than indicated above. Tax credits reduce the effective Connecticut tax rate for single filers
with taxable income up to $52,500 and joint filers up to $100,500. The combined tax brackets assume that Connecticut taxes are
itemized deductions for federal income tax purposes. Investors who do not itemize deductions on their federal income tax
return will have a higher combined bracket and higher taxable equivalent yield than those indicated above. The applicable
federal tax rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Connecticut State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax and Connecticut personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Connecticut personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits that
may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON FLORIDA LIMITED MATURITY
MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Florida considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Florida issuers. Such information supplements the information in the Prospectus
and 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 Florida issuers. Neither
the Trust nor the Portfolio has independently verified this information.
Florida is a state characterized by rapid population growth and substantial
capital needs which are being funded through frequent debt issuances and
pay-as-you-go financing. Florida's economy is characterized by a large service
sector, a dependence on the tourism and construction industries, and a large
retirement population. The management of rapid growth has been the major
challenge facing state and local governments. While attracting many senior
citizens, Florida also offers a favorable business environment and growing
employment opportunities that have continued to generate working-age population
immigration. As this growth continues, particularly within the retirement
population, the demand for both public and private services will increase, which
may strain the service sector's capacity and impede the State's budget balancing
efforts.
Florida has a proportionally greater number of persons of retirement age; a
factor that makes Florida's property and transfer payment taxes a relatively
more important source of state funding. Because transfer payments are typically
less sensitive to the business cycle than employment income, they may act as a
stabilizing force in weak economic periods.
Florida tourism appears to be suffering the effects of negative publicity
regarding crime against tourists in the State, product maturity, higher prices
and more aggressive marketing by competing vacation destinations. Tourist
arrivals are expected to decrease 2.7% and 3.2%, in fiscal years 1996-97 and
1997-98, respectively. The total number of visiting tourists is expected to
reach 42.6 million and 43.9 million during fiscal years 1996-97 and 1997-98,
respectively.
There has been a decline in Florida's dependency on highly cyclical
construction and construction-related manufacturing sectors. For example, the
total contract construction employment as a share of total non-farm employment
reached a peak of over 10% in 1973. In 1980, the share was roughly 7.5%, and in
1995, the share had edged downward to nearly 5%. This trend is expected to
continue as Florida's economy continues to diversify.
The ability of the State and its local units of government to satisfy its
debt obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the State
in which the issuer of the debt obligations is located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and investment capital.
North and Central Florida are impacted by problems in the agricultural sector,
particularly with regard to the citrus and sugar industries. Short-term adverse
economic conditions may be created in these areas, and in the State as a whole,
due to crop failures, severe weather conditions or other agriculture-related
problems. The State economy also has historically been dependent on the tourism
and construction industries and is, therefore, sensitive to trends in those
sectors.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $92,909,192. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $508,203, $664,262 and $821,095, respectively (equivalent to
0.46%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $11,142 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $631,417 and the Principal Underwriter
received approximately $245,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$714,000. During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $130,286 for Class I shares and $9,001 for
Class II shares, of which $129,625 and $8,872, respectively, was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $1,637.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1995, the Portfolio paid no
brokerage commissions on portfolio transactions. For the fiscal year ended March
31, 1996, the Portfolio paid brokerage commissions of $10,609 on portfolio
security transactions aggregating $95,025,037 to firms which provided some
research services to BMR or its affiliates (although many of such firms may have
been selected in any particular transaction primarily because of their execution
capabilities).
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................................... $523 $1,557(2) $145,000(5)
Samuel L. Hayes, III ....................................... 473 1,808(3) 155,000(6)
Norton H. Reamer ........................................... 470 1,687 145,000
John L. Thorndike .......................................... 484 1,818(4) 148,750(7)
Jack L. Treynor ............................................ 519 1,796 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 23, 1997. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 29, 1992 through March 31, 1997, and for the one-year period ended
March 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC*** ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 5/29/92* $1,000 $1,229.71 $1,229.71 22.97% 4.36% 22.97% 4.36%
1 Year
Ended 3/31/97 3/31/96 $1,000 $1,020.48 $ 991.04 2.05% 2.05% -0.90% -0.90%
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.
- ------------
*Investment operations began on May 29, 1992.
**If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
***No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.74%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.74% would be 5.70% assuming a
combined federal and State tax rate of 34.42%.
See the Tax Equivalent Yield Table information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 20.69% and 17.65%, respectively, of
the outstanding Class I and Class II shares, which it held on behalf of its
customers who are the beneficial owners of such shares, and as to which it has
voting power under certain limited circumstances. In addition, as of June 30,
1997, NFSC FEBO #ODG-076465, Shirley Cohen Rev. Inter Vivos Shirley Cohen TTEE,
N. Miami Beach, FL 33180 owned beneficially and of record 7.08% of the
outstanding Class I shares of the Fund. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Florida Limited Maturity Tax Free
Fund to EV Marathon Florida Limited Maturity Tax Free Fund on January 11, 1994
and to EV Marathon Florida Limited Maturity Municipal Fund on December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The tables below give the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and the
Florida intangibles tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
YOU ARE IN
THIS IN YOUR FEDERAL TAX BRACKET, A TAX-FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON FEDERAL ------------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------- -------------------------- ----------- ------------------------------------------------------------
EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751-$124,650 $ 99,601-$151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651-$271,050 $151,751-$271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
<CAPTION>
UNDER FLORIDA INTANGIBLES TAX LAWS, A TAX FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON ------------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------- -------------------------- ------------------------------------------------------------
EQUALS A TAX EQUIVALENT YIELD REFLECTING EXEMPTION FROM
INTANGIBLES TAX:**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 4.95% 5.54% 6.13% 6.71% 7.30% 7.89% 8.48%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 5.85 6.54 7.23 7.93 8.62 9.31 10.01
$ 59,751-$124,650 $ 99,601-$151,750 6.10 6.83 7.55 8.27 9.00 9.72 10.44
$124,651-$271,050 $151,751-$271,050 6.58 7.36 8.14 8.92 9.70 10.48 11.26
Over $271,050 Over $271,050 6.97 7.80 8.62 9.45 10.28 11.10 11.93
* Net amount subject to federal personal income tax after deductions and exemptions.
** A Florida intangibles tax on personal property of $2.00 per $1,000 is generally imposed after exemptions on the value of
stocks, bonds, other evidences of indebtedness and mutual fund shares. An example of the effect of the Florida intangibles
tax on the tax brackets of Florida taxpayers is as follows. A $10,000 investment subject to the tax would require payment of
$20 annually in intangibles taxes. If the investment yielded 5.5% annually or $550, the intangibles tax as a percentage of
income would be $20/$550 or 3.64%. If a taxpayer were in the 36% federal income tax bracket, assuming the intangibles taxes
were deducted as an itemized deduction on the federal return, the taxpayer would be in a combined federal and Florida state
tax bracket of 38.33% [36% + (1 - .36) X 3.64%] with respect to such investment. A Florida taxpayer whose intangible personal
property is exempt or partially exempt from tax due to the availability of exemptions will have a lower taxable equivalent
yield than indicated above.
</TABLE>
Note: The federal income tax brackets do not take into account the effect of a
reduction in the deductibility of itemized deductions for taxpayers with
adjusted gross income in excess of $121,200. The tax brackets also do not show
the effects of phaseout of personal exemptions for single and joint filers with
adjusted gross incomes in excess of $121,200 and $181,800, respectively. The
effective tax brackets and equivalent taxable yields of such taxpayers will be
higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. The table does not take into account the Florida
intangibles tax, state or local taxes, if any, payable on Fund distributions to
individuals who are not Florida residents, or intangibles taxes, if any, imposed
under the laws of other states. It should also be noted that the interest earned
on certain "private activity bonds" issued after August 7, 1986, while exempt
from the regular federal income tax, is treated as a tax preference item which
could subject the recipient to the federal alternative minimum tax. The
illustrations assume that the federal alternative minimum tax is not applicable
and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON MASSACHUSETTS LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Massachusetts considerations is
given to investors in view of the Portfolio's policy of concentrating its
investments in Massachusetts issuers. Such information supplements the
information in the Prospectus and 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 Massachusetts issuers. Neither the Trust nor the Portfolio has
independently verified this information.
Beginning in 1989, the Commonwealth's economy slowed significantly. Most of
the employment growth during this period was experienced in the services and
trade sectors of the economy, while the manufacturing sector continues to suffer
employment losses. Like most other industrial states, Massachusetts has seen a
shift in employment from manufacturing to more technology and service- based
industries. Between 1993 and 1994, per capita personal income in Massachusetts
increased 3.6% as compared to 1.7% for the nation as a whole. The unemployment
rate for the Commonwealth fell from 4.6% in January, 1996 to 4.0% in January,
1997.
1995 Fiscal Year. Fiscal 1995 tax revenue collections totalled $11.163
billion. Budgeted revenues and other sources, including non-tax revenue
collected in fiscal 1995 totalled $16.387 billion, approximately $837 million,
or 5.4%, above 1994 budgeted revenues of $15.550 billion. Budgeted expenditures
and other uses of funds in fiscal 1995 were approximately $16.251 billion,
approximately $728 million, or 4.7% above fiscal 1994 budgeted expenditures and
uses of $15.523 billion. The Commonwealth ended fiscal 1995 with an operating
gain of $137 million and an ending fund balance of $726 million.
1996 Fiscal Year. Current fiscal 1996 projected spending is approximately
$16.963 billion, including approximately $153.2 million reserved for
contingencies. Projected revenues are approximately $16.851 billion. The fiscal
1996 forecast for federal reimbursements has decreased by approximately $7
million primarily due to lower reimbursable spending in public assistance
programs.
1997 Fiscal Year. On April 13, 1996, the House of Representatives adopted a
fiscal 1997 budget that provides for total expenditures of approximately $17.615
billion. A legislative conference committee will develop a compromise budget for
consideration by the House and Senate, which upon enactment by both houses will
be presented to the Governor. Tax collections are reported to be well above the
Revenue Department's target range.
Major infrastructure projects are anticipated over the next decade. It is
currently anticipated that the federal government will assume responsibility for
approximately 90% of the estimated $7.7 billion cost. The projects include the
depression of the central artery which traverses the City of Boston and the
construction of a third harbor tunnel linking downtown Boston to Logan Airport.
The Massachusetts Water Resources Authority is undertaking capital projects for
the construction and rehabilitation of sewage collection and treatment
facilities in order to bring wastewater discharges into Boston Harbor into
compliance with federal and state pollution control requirements. The harbor
cleanup project is estimated to cost $3.5 billion in 1994 dollars. Work on the
project began in 1988 and is expected to be complete in 1999, with the most
significant expenditures occurring between 1990 and 1999. The majority of the
project's expenditures will be paid for by local communities, in the form of
user fees, with federal and state sources making up the difference; the
assumptions regarding the amounts to be supplied through federal aid are subject
to change.
The fiscal viability of the Commonwealth's authorities and Municipalities is
inextricably linked to that of the Commonwealth. The Commonwealth guarantees the
debt of several authorities, most notably the Massachusetts Bay Transportation
Authority and the University of Massachusetts Building Authority. Their ratings
are based on this guarantee and can be expected to move in tandem. Several other
authorities are funded in part or in whole by the Commonwealth and their debt
ratings may be adversely affected by a negative change in those of the
Commonwealth.
Massachusetts' municipal governments are constrained in their ability to
increase local revenues by an initiative passed in 1980, "Proposition 2 1/2."
Proposition 2 1/2 limits the amount of property taxes that can be levied in a
fiscal year to the lower of 2.5% of fair value or 102.5% of the previous year's
levy unless overridden by a majority of local voters. Proposition 2 1/2 also
limits the amount the municipality can be charged by certain government entities
such as counties. While Proposition 2 1/2 is not a constitutional question and
can therefore be amended or abolished by the legislature, no significant
challenge has been raised since it took effect. Increased revenues received by
the state and passed on to local governments during the 1980's ameliorated the
effect of this initiative and made local governments in Massachusetts more
dependent on state aid than those in other states. Therefore, the recent fiscal
problems encountered by the state have amplified the economic and fiscal
problems encountered by cities and towns throughout the Commonwealth. A
continuation of the Commonwealth's fiscal problems resulting in further local
aid reductions could, in the absence of overrides, result in payment defaults by
local cities and towns and/or ratings downgrades resulting in an erosion of
their market value.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $69,969,936. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $385,610, $506,126 and $559,365, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $18,041 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $493,460 and the Principal Underwriter
received approximately $178,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$475,700. During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $109,020 for Class I shares and $7,836 for
Class II shares, of which $107,717 and $7,019, respectively, was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $1,587.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $27,291 and $9,775, respectively, on portfolio security
transactions aggregating $255,964,805 and $71,608,464, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex:(1)
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $346 $1,141(2) $145,000(5)
Samuel L. Hayes, III .................... 315 1,431(3) 155,000(6)
Norton H. Reamer ........................ 313 1,311 145,000
John L. Thorndike ....................... 322 1,432(4) 148,750(7)
Jack L. Treynor ......................... 346 1,381 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 23, 1997. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from June 1, 1992 through March 31, 1997 and for the one-year period ended March
31, 1997.
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC*** --------------------------- -------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 6/1/92* $1,000 $1,231.63 $1,231.63 23.16% 4.41% 23.16% 4.41%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,027.40 $ 997.73 2.74% 2.74% -0.23% -0.23%
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.
- ----------
* Investment operations began on June 1, 1992.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.90%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.90% would be 6.41%, assuming a
combined federal and State tax rate of 39.28%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 10.20% and 14.65%, respectively, of
the outstanding Class I and Class II 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. To the knowledge of the Trust,
no other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Massachusetts Limited Maturity
Tax Free Fund to EV Marathon Massachusetts Limited Maturity Tax Free Fund on
January 11, 1994 and to EV Marathon Massachusetts Limited Maturity Municipals
Fund on December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Massachusetts State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND MASSACHUSETTS STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- MA STATE ---------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 25.20% 5.35% 6.02% 6.68% 7.35% 8.02% 8.69% 9.36%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 36.64 6.31 7.10 7.89 8.68 9.47 10.26 11.05
$ 59,751 - $124,650 $ 99,601 - $151,750 39.28 6.59 7.41 8.23 9.06 9.88 10.70 11.53
$124,651 - $271,050 $151,751 - $271,050 43.68 7.10 7.99 8.88 9.77 10.65 11.54 12.43
Over $271,050 Over $271,050 46.85 7.53 8.47 9.41 10.35 11.29 12.23 13.17
* Net amount subject to federal and Massachusetts personal income tax after deductions and exemptions.
+ The combined tax rates include a Massachusetts tax rate of 12% applicable to taxable bond interest and dividends, and assume
that Massachusetts taxes are itemized deductions for federal income tax purposes. Investors who do not itemize deductions on
their federal income tax return will have a higher combined bracket and higher taxable equivalent yield than those indicated
above. The applicable federal tax rates within the brackets are 15%, 28%, 31%, 36%, and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Massachusetts State income
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint filers
with adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax and Massachusetts personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Massachusetts personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits that
may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON MICHIGAN LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Michigan considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Michigan issuers. Such information supplements the information in the Prospectus
and 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 Michigan issuers.
Neither the Trust nor the Portfolio has independently verified this information.
The State's economy is overly dependent on the manufacturing sector, more
specifically the auto industry. Manufacturing accounts for 23% of total
employment as compared to the national average of 17%. The dependency on
manufacturing makes the State economy overly susceptible to economic downturns.
For January, 1997, the State unemployment rate was 4.9% as compared to the
national average of 5.4%. Modest employment growth is projected for 1997. An
improving economy and successful cost containment have enabled the State to
improve its financial position. For 1995, the Budget Stabilization Fund was
slightly greater than $1.0 billion and is projected to reach $1.1 billion for
1996. The Governor has proposed reducing individual and business income taxes.
Following this reduction, revenues were budgeted to decline 1.2% in 1997.
In March, 1994, Michigan voters approved a change in the tax system. The
most significant provisions were an increase in the sales tax rate from 4% to
6%, a reduction in the income tax rate from 4.6% to 4.4% and the creation of a
statewide property tax. These changes are expected to provide sufficient
revenues to offset the elimination of property taxes for school district
operating purposes. There can be no assurance that school districts will receive
sufficient revenues to be able to service any limited tax bonds they may have
outstanding and which may be held by the Portfolio.
Under the State Constitution, the raising of taxes by the Legislature is
limited if doing so would cause the ratio of Total State Revenues (except
federal aid) to Personal Income of Michigan (as such terms are defined in the
State Constitution) to exceed certain limits. The only exceptions to this
revenue limit are a majority approval of a referendum question or a specific
emergency declared by a two-thirds vote of the Legislature. However, this limit
does not apply to taxes imposed for the payment of principal and interest on
bonds of the State, if the bonds are approved by voters and authorized by a vote
of two-thirds of the members of each House of the Legislature and certain school
district loans. Local units of government and local authorities are authorized
to issue bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy taxes
for the payment of such obligations is subject to the foregoing limitations
unless the obligations were authorized before December 23, 1978 or approved by
the electors. The Constitution prohibits the State from reducing the proportion
of total State spending paid to all local units of government, taken as a group,
below that proportion in effect in the 1978-79 fiscal year. The State may not
mandate new or increased levels of services to be provided by local units
without making appropriations to cover any increased costs.
Under the State Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the maximum
authorized tax rate would be reduced by a factor which would result in the same
maximum potential tax revenues to the local taxing unit as if the valuation of
taxable property (less new construction and improvements) had grown only at the
Consumer Price Index rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be increased at the Consumer Price Index rate. Conversely, if
taxable property values rise slower than consumer prices, tax rates may be
raised accordingly, but never higher than the rate authorized on December 23,
1978, without elector approval.
The ability of the State to pay the principal and interest on its general
obligation bonds may be affected by the limitations described above. Similarly,
the ability of local units to levy taxes to pay the principal of and interest on
their general obligations is subject to the constitutional, statutory and
charter limits described below.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $14,996,432. For the
fiscal years ended March 31, 1997 and 1996, the Portfolio paid BMR advisory fees
of $83,756 and $126,312, respectively (equivalent to 0.48% and 0.47%
respectively, of the Portfolio's average daily net assets for each such year).
For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $163,811 (equivalent to 0.46% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of its advisory fee in the amount of
$40,822. The Portfolio's Investment Advisory Agreement with BMR is dated April
9, 1993 and may be continued as described under "Investment Adviser and
Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $3,888 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $118,937 and the Principal Underwriter
received approximately $65,000 in CDSCs imposed on early redeeming shareholders.
These payments reduced uncovered distribution charges under the Plan. As at
March 31, 1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $330,900. During
the fiscal year ended March 31, 1997, the Fund made service fee payments under
the Plan aggregating $40,130 for Class I shares, of which $39,876 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $487.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $19,514 and $1,986, respectively, on portfolio security
transactions aggregating $140,877,687 and $17,783,836, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................................... $35 $35(2) $145,000(5)
Samuel L. Hayes, III ....................................... 31 31(3) 155,000(6)
Norton H. Reamer ........................................... 31 31 145,000
John L. Thorndike .......................................... 32 32(4) 148,750(7)
Jack L. Treynor ............................................ 35 35 150,000
- --------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $15 of deferred compensation.
(3) Includes $5 of deferred compensation.
(4) Includes $16 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from April 16, 1993 through March 31, 1997 and for the one-year period ended
March 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC*** -------------------------- -----------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 4/16/93* $1,000 $1,143.39 $1,133.65 14.34% 3.44% 13.36% 3.22%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,041.43 $1,011.43 4.14% 4.14% 1.14% 1.14%
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.
- ------------
* Investment operations began on April 16, 1993.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.83%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.83% would be 5.98%, assuming a
combined federal and State tax rate of 35.93%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 17.74% and 16.79%, respectively, of
the outstanding Class I and Class II 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 June 30,
1997, Smith Barney Inc. 00121000114, New York, NY 10013 owned beneficially and
of record 13.30% of the outstanding Class II shares of the Fund. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Michigan Limited Maturity Tax
Free Fund to EV Marathon Michigan Limited Maturity Tax Free Fund on August 1,
1994 and to EV Marathon Michigan Limited Maturity Municipals Fund on December
15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax,
Michigan State income tax, Michigan State intangibles tax and Michigan City
income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND MICHIGAN STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- MI STATE ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.33% 5.02% 5.65% 6.28% 6.90% 7.53% 8.16% 8.79%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.52 5.93 6.67 7.41 8.15 8.89 9.63 10.37
$ 59,751 - $124,650 $ 99,601 - $151,750 35.33 6.19 6.96 7.73 8.50 9.28 10.05 10.82
$124,651 - $271,050 $151,751 - $271,050 40.02 6.67 7.50 8.34 9.17 10.00 10.84 11.67
Over $271,050 Over $271,050 43.39 7.07 7.95 8.83 9.72 10.60 11.48 12.37
* Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
+ The combined tax brackets include a Michigan tax rate of 4.4%, Michigan City income tax rate of 1% (which may vary by city),
and a Michigan intangibles tax rate of 0.875%, and assume that Michigan State and local taxes are itemized deductions for
federal income tax purposes. Investors who do not itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax rates within the
brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Michigan State and local income
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint filers
with adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax and Michigan personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Michigan personal income taxes. It should also be noted
that the interest earned on certain "private activity bonds" issued after August
7, 1986, while exempt from the regular federal income tax, is treated as a tax
preference item which could subject the recipient to the federal alternative
minimum tax. The illustrations assume that the federal alternative minimum tax
is not applicable and do not take into account any tax credits that may be
available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NEW JERSEY LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain New Jersey considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in New Jersey issuers. Such information supplements the information in the
Prospectus and 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 New
Jersey issuers. Neither the Trust nor the Portfolio has independently verified
this information.
New Jersey has a well diversified economy and high wealth levels. Per capita
income ranks as the second highest in the nation at 28% above the U.S. average.
The State's economy benefits from its proximity to New York and other major
eastern seaboard cities. New Jersey's economy, like most states, suffered during
the past recession with unemployment increasing and surpassing the national
average. New Jersey's adjusted unemployment rate for April 1997 was 5.2%
compared to 4.9% nationally.
The State ended fiscal 1993 with an $855 million surplus, approximately half
of which was used in the 1994 budget. 1994 had an appropriation for all funds of
$15.7 billion, up 4.8% from fiscal 1993 revised appropriations of $14.7 billion.
Both years benefited from $412 million in nonrecurring revenues from retroactive
federal Medicaid payments. After the Legislature reduced the Governor's fiscal
1994 requests by $182 million, about half the $855 million fiscal 1993 total
surplus was used for fiscal 1994, with a June 30, 1994 forecast of $416 million
- -- $110 million allocated to the General Fund and over $305 million to rainy day
and taxpayer relief funds.
In 1994, New Jersey adopted a 5% personal income tax cut retroactive to
January 1, 1994. In 1995, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. On June 26, 1995, the New Jersey State
Legislature passed an additional 15% reduction to take effect January 1, 1996.
Fiscal year 1996 ended with total revenues up 4.3% to $15.6 billion.
However, total spending increased to $16.3 billion. As of January 1, 1996, New
Jersey fulfilled Governor Whitman's promised personal income tax cut of 30%.
Even so, tax revenues were up in all categories with income tax receipts up by
4.3%. The higher spending level resulted in a decrease of total fund balances to
$880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue
$2.8 billion of bonds to fund the state's pension liability. The plan would free
up $647 million of funds for the current year but has raised budgetary
sleight-of-hand concerns. Largely, however, the New Jersey economy has performed
well, growing faster than its Mid-Atlantic neighbors, though slower than the
nation as a whole.
General obligation bonds of New Jersey are the primary method for New Jersey
financing of capital projects. These bonds are backed by the full faith and
credit of New Jersey. New Jersey tax revenues and certain other fees are pledged
to meet the principal and interest payments required to fully pay the debt. No
general obligation debt can be issued by New Jersey without prior voter
approval, except that, pursuant to a constitutional amendment, no voter approval
is required for any law authorizing the creation of a debt for the purpose of
refinancing all or a portion of the outstanding debt of New Jersey, so long as
such law requires that the refinancing provides debt service savings. The New
Jersey Constitution also provides that no voter approval is required for debt
issued for purposes of war, to repel invasion, to suppress insurrection or to
meet an emergency caused by disaster or act of God. Capital construction can
also be funded by appropriation of current revenues on a pay- as-you-go basis.
All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning.
Other State-related obligations include those created pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the State. The rental for such buildings is equal to the debt service
relating thereto plus payments in lieu of real estate taxes. Legislation
provides for future appropriations for State aid to local school districts equal
to debt service on a maximum principal amount of $280,000,000 of bonds issued by
such local school districts for construction and renovation of school facilities
and for State aid to counties equal to debt service on up to $80,000,000 of
bonds issued by counties for construction of county college facilities.
The authorizing legislation for various State entities provides for specific
budgetary procedures with respect to certain obligations issued by such
entities. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible State entities. Currently, there are two such entities available for
State appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve which
required New Jersey to appropriate funds. It is anticipated that the agency's
revenue will continue to be sufficient to cover debt service on its bonds. The
State provides the South Jersey Port Corporation with funds to cover all debt
service and property tax requirements when earned revenues are anticipated to be
insufficient to cover these obligations. In the past, anticipated revenues have,
in some cases, been insufficient to cover debt service and/or all property tax
requirements. There are numerous other State- created entities with outstanding
debt. This debt is supported by revenues derived from or assets of the various
projects financed by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties and
municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may be
issued and requiring their repayment within three months of the end of the
fiscal year in which they are issued. The Local Bond Law governs the issuance of
bonds and notes and bars the issuance of bonds for the payment of current
expenses or to pay outstanding obligations, except where permitted by the Local
Finance Board. State law also authorizes State officials to supervise fiscal
administration in any municipality facing financial difficulties.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $58,265,939. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $324,454, $412,459 and $468,562, respectively (equivalent to
0.47%, 0.46% and 0,46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $28,881 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $427,268 and the Principal Underwriter
received approximately $138,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$444,900. During the fiscal year ended March 31, 1997, the Fund made service fee
of which payments under the Plan aggregating $94,190 for Class I shares and
$7,236 for Class II shares, of which $93,603 and $7,110, respectively, was paid
to Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $1,560 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $61,275 and $8,845, respectively, on portfolio security
transactions aggregating $432,619,673 and $76,006,263, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended, March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex:(1)
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $346 $1,141(2) $145,000(5)
Samuel L. Hayes, III .................... 315 1,431(3) 155,000(6)
Norton H. Reamer ........................ 313 1,311 145,000
John L. Thorndike ....................... 322 1,432(4) 148,750(7)
Jack L. Treynor ......................... 346 1,381 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from June 1, 1992 through March 31, 1997 and the one-year period ended March 31,
1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE DEDUCTING TOTAL RETURN AFTER DEDUCTING
DEDUCTING THE DEDUCTING THE THE CDSC THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC*** --------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 6/1/92* $1,000 $1,238.99 $1,238.99 23.90% 4.54% 23.90% 4.54%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,035.26 $1,005.38 3.53% 3.53% 0.54% 0.54%
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.
- ------------
* Investment operations began on June 1, 1992.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.72%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.72% would be 5.76%, assuming a
combined federal and State tax rate of 35.40%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
STATE AND LOCAL TAXES
If, in any year in which the Fund is subject to New Jersey taxation, it is
treated as a qualified investment fund under New Jersey law, as defined below,
the Fund will not be required to pay any New Jersey state tax, except for a $250
New Jersey Corporation business (franchise) tax. A "qualified investment fund"
is any investment company or trust registered with the Commission, or any series
of such investment company or trust, which, for the calendar year in which the
distribution is paid, (a) has no investments other than interest-bearing
obligations, obligations issued at a discount, and cash and cash items,
including receivables and financial options, futures, futures contracts, or
other similar financial instruments related to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto, and (b) has
not less than 80% (determined at the end of each fiscal quarter) of the
aggregate principal amount of all of its investments, excluding to the extent
such instruments are authorized by Section 851(b) of the Code, cash and cash
items (including receivables), in obligations (1) issued by or on behalf of New
Jersey or any county, municipality, school or other district, agency, authority,
commission, instrumentality, public corporation, body corporate and politic or
political subdivision of New Jersey, or (2) statutorily free from New Jersey or
local taxation under other acts of New Jersey or under the laws of the United
States, including, but not limited to, obligations of Puerto Rico, the Virgin
Islands and Guam (collectively, "Qualifying Investments").
In the opinion of Wilentz, Goldman, & Spitzer, P.A., special tax counsel to
the Fund, under existing New Jersey law provided the Fund qualifies, and
continues to qualify, as a qualified investment fund, shareholders will not be
required to include in their New Jersey gross income distributions from the Fund
to the extent that such distributions are attributable to interest or gains from
Qualifying Investments. The foregoing exclusion applies only to shareholders who
are individuals, estates or trusts subject to the New Jersey gross income tax.
Distributions from the Fund will not be excluded from net income and shares of
the Fund will not be excluded from investment capital in determining New Jersey
corporation business (franchise) and corporation income taxes for corporate
shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 15.46% and 15.37%, respectively, of
the outstanding Class I and Class II shares, which it 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 Class I shares of the Fund indicated after their names: Harvey B.
Fine, Personal & Confidential, c/o Bak-A-Lum, Linden, NJ 07036 (5.14%). To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance New Jersey Limited Maturity Tax
Free Fund to EV Marathon New Jersey Limited Maturity Tax Free Fund on January
11, 1994 and to EV Marathon New Jersey Limited Maturity Municipals Fund on
December 15, 1995.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
Jersey State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND NEW JERSEY STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- -------------------- NJ STATE ---------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- --------------------------------------------- ------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 31.98 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 59,751-$124,650 $ 99,601-$151,750 35.40 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$124,651-$271,050 $151,751-$271,050 40.08 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $271,050 Over $271,050 43.45 7.07 7.96 8.84 9.73 10.61 11.49 12.38
* Net amount subject to federal and New Jersey personal income tax after deductions and exemptions.
+ The combined federal and New Jersey tax brackets are calculated using the highest New Jersey tax rate applicable within each
bracket. Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields
than indicated above. The combined tax brackets assume that New Jersey taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined bracket and
higher taxable equivalent yield then those indicated above. The applicable federal tax rates within the brackets are 15%, 28%,
31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including New Jersey State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and New Jersey personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for New Jersey personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the federal
alternative minimum tax. The illustrations assume that the federal alternative
minimum tax is not applicable and do not take into account any tax credits that
may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NEW YORK LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain New York considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
New York issuers. Such information supplements the information in the Prospectus
and 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 New York issuers.
Neither the Trust nor the Portfolio has independently verified this information.
The recession lasted longer in New York and the State's economic recovery
has lagged behind the nation's. Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been below the
national average primarily due to significant cutbacks in the computer,
manufacturing, utility, defense and banking industries. New York's economy is
expected to continue to expand modestly during 1997. The unemployment rate for
the State in February, 1997 was 6.3%, unchanged from last year, versus 5.3% for
the nation. New York City's unemployment rate was 8.8% for 1996, up from 8.2% a
year earlier.
In July 1995, the State Comptroller issued its audit of the State's
1994-1995 fiscal year prepared in accordance with generally accepted auditing
standards. The State completed its 1994-1995 fiscal year with a General Fund
operating deficit of $1.426 billion, as compared with an operating surplus of
$914 million for the previous fiscal year. The 1994-1995 fiscal year deficit was
caused by several factors including the adoption of changes in accounting
methodologies by the State Comptroller. The State used $1.026 billion of the
1993-1994 fiscal year surplus in the 1994-1995 fiscal year.
The State ended its 1995-1996 fiscal year in balance, with a reported
1995-1996 General Fund cash surplus of $445 million. Prior to adoption of the
State's 1995-1996 fiscal year budget, the State had projected a potential budget
gap of approximately $5 billion, which was closed primarily through spending
reductions, cost containment measures, State agency actions and local assistance
reforms.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase of
tax revenues in the wake of tax reductions in 1996, with personal income tax
receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer taxes
and fees up 2.5%. Tax collections were particularly enhanced by the booming
financial sector. Growth in that sector is expected to slow in fiscal year 1998,
which could impact tax revenue growth. Government spending also declined by
0.9%, particularly capital spending and debt service.
During the past several years, the State has been forced to borrow on a
seasonal basis due to cash flow timing problems. In June, 1990, the Local
Government Assistance Corporation ("LGAC") was formed as a public benefit
corporation for the purpose of issuing long term obligations designed to
eliminate this need. The legislation which created the LGAC specified that the
obligations will be amortized over no more than 30 years and put a $4.7 billion
dollar cap, net of LGAC proceeds, on the seasonal borrowing program. As of June
1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion
completing the program. This cap may be exceeded in cases where the Governor and
the legislature have certified the need for additional borrowing and have
devised a method for reducing it back to the cap no later than the fourth fiscal
year after the limit is exceeded. If this cap were to be exceeded, it could
result in action by the rating agencies which could adversely affect prices of
bonds held by the Portfolio.
In 1975, New York City encountered severe financial difficulties which
impaired and continues to impair the borrowing ability of the City. For each of
the 1981 through 1996 fiscal years, the City achieved balanced operating results
as reported in accordance with generally accepted accounting principles.
Pursuant to the laws of the State, the City prepares a four-year annual
financial plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections and outlines
proposed gap-closing programs for years with projected budget gaps. The City
implemented various actions to close projected budget gaps of $3.3 billion, $2.3
billion, $3.1 billion and $2.7 billion for the 1994, 1995, 1996 and 1997 fiscal
years, respectively. Such actions included, among others, tax increases, service
and personnel reductions, productivity savings, debt refinancings, asset sales
and cost savings related to employee benefits. For the 1998 fiscal year, the
City previously projected a budget gap of $720 million after taking into account
the prepayment in the 1997 fiscal year of $856 million of debt service due in
the 1998 and 1999 fiscal years. Various gap-closing actions to balance the 1998
fiscal year budget include advancing fiscal year 1997 surplus into fiscal year
1998, reductions in entitlement programs, federal welfare reform savings,
additional state aid, cost saving initiatives and asset sales. The City
currently projects budget gaps of $2.0 billion, $2.9 billion and $2.7 billion
for its 1999, 2000 and 2001 fiscal years, respectively. The City's gap-closing
plans for the 1999 through 2001 fiscal years include savings from restructuring
city government and privatization, City agency actions, additional State aid,
asset sales and cost saving actions related to entitlement programs and
procurement. There can be no assurance that additional gap-closing measures will
not be required, the implementation of which could adversely affect the City's
economic base, and there is no assurance that such measures will enable the City
to achieve a balanced budget, as required by State law, for any of the 1998
through 2001 fiscal years. Implementation of the City's four-year annual
financial plan is also dependent upon the City's ability to market its
securities successfully in the public credit markets. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $5.7
billion of general obligation bonds and $5.7 billion of bonds to be issued by
the New York City Transitional Finance Authority (TFA) primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make other
capital investments. In 1997, the State enacted the New York City Transitional
Finance Authority Act (the "Finance Authority Act"), which created the TFA, to
assist the City to avoid certain state constitutional debt limitations. The TFA
is authorized to issue up to $7.5 billion in long-term debt. On June 2, 1997 an
action was brought in the State Supreme Court, Albany County seeking a
declaratory judgment declaring that the Finance Authority Act to be
unconstitutional. If the Finance Authority Act were voided, and depending on
whether the New York State Legislature took other action which would provide
relief to the City under the general debt limit, the City might be required to
curtail its currently defined capital program early in the 1998 fiscal year. The
fiscal health of New York City, which is the largest issuer of municipal bonds
in the country and a leading international commercial center, exerts a
significant influence upon the fiscal health and bond values of issues
throughout the State. Bond values of the Municipal Assistance Corporation, the
State of New York, the New York Local Government Assistance Corporation, the New
York State Dormitory Authority, the New York City Municipal Water Finance
Authority and The Metropolitan Transportation Authority would be particularly
affected by serious financial difficulties encountered by New York City. The
Portfolio could be expected to hold bonds issued by many, if not all of these
issuers, at any given time.
As of 1997, the City's general obligation bonds were rated "Baa1," "BBB+"
and "A-" by Moody's, S&P and Fitch, respectively. On July 10, 1995, S&P revised
downward its rating on City general obligation bonds from A- to BBB+. On
February 28, 1996, Fitch placed the City's general obligation bonds on Fitch
Alert with negative implications. On November 5, 1996, Fitch removed the City's
general obligation bonds from FitchAlert, although Fitch stated that the outlook
remains negative. There is no assurance that such ratings will continue for any
given period of time or that they will not be revised downward or withdrawn
entirely. Any such downward revision or withdrawal could have an adverse effect
on obligations held by the Portfolio. Ratings for the State are Moody's "A(2),"
S&P "A-" and Fitch "A+".
The State's economic and fiscal viability are mutually and intricately tied
to those of its authorities and localities, which make up the major portion of
State bond issuance. Any serious financial difficulties encountered by these
entities, including their inability to access capital markets, would have a
significant, adverse effect upon the value of bonds issued elsewhere within the
State and thus upon the value of the interests in the Portfolio. State plans to
reduce aid to local cities and towns may have a negative impact on municipal
finances and ratings throughout the State. Such ratings changes could erode the
value of their bonds and/or lead to defaults.
The State either guarantees or supports lease-purchase agreements or
contractual obligations, financing arrangements or through moral obligation
provisions, a large amount of Authority indebtedness. While debt service is
normally paid out of revenues generated by the projects of the Authorities, the
State has, from time to time, had to appropriate amounts to enable the
Authorities to meet their financial obligations and, in some cases, to prevent
default.
FEES AND EXPENSES
INVESTMENT ADVISORY
As of March 31, 1997, the Portfolio had net assets of $100,013,748. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $557,305, $722,493 and $845,836, respectively (equivalent to
0.46% of the Portfolio's average daily net assets for each such year). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992 and
may be continued as described under "Investment Adviser and Administrator" in
Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $33,166 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $754,897 and the Principal Underwriter
received approximately $269,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$680,400. During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $164,114 for Class I shares and $10,036 for
Class II shares, of which $163,628 and $9,901, respectively, was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $2,525 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $40,494 and $11,615, respectively, on portfolio
security transactions aggregating $360,095,562 and $104,037,530, respectively,
to firms which provided some research services to BMR or its affiliates
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended March 31, 1995, the Portfolio paid no brokerage commissions on
portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $693 $1,557(2) $145,000(5)
Samuel L. Hayes, III .......................... 629 1,808(3) 155,000(6)
Norton H. Reamer .............................. 626 1,687 145,000
John L. Thorndike ............................. 644 1,818(4) 148,750(7)
Jack L. Treynor ............................... 692 1,796 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio
since June 23, 1997. Ms. Anderes has been a Vice President of BMR and Eaton
Vance since 1994 and is an officer of various investment companies managed by
Eaton Vance or BMR. Prior to joining Eaton Vance, Ms. Anderes was Vice
President and portfolio manager, Lazard Freres Asset Management (1992-1994).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 29, 1992 through March 31, 1997 and for the one-year period ended March
31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC*** ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 5/29/92* $1,000 $1,235.56 $1,235.56 23.56% 4.47% 23.56% 4.47%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,027.93 $ 998.26 2.79% 2.79% -0.17% -0.17%
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.
- ----------
* Investment operations began on May 29, 1992.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.88%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.88% would be 6.36%, assuming a
combined federal and State tax rate of 38.99%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
In any year in which the Fund is subject to New York taxation, qualifies as
a regulated investment company under Subchapter M of the Code and distributes
all of its investment company taxable income and net capital gains, the Fund
will not be required to pay any New York State franchise tax or New York City
general corporation tax, with the possible exception of certain nominal minimum
taxes.
Distributions from the Fund will not be excluded from net income and shares
of the Fund will not be excluded from investment capital in determining New York
State or City franchise and corporation taxes for corporate shareholders.
Shares of the Fund will not be subject to the New York State or City
property tax.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 17.21% and 15.56%, respectively, of
the outstanding Class I and Class II 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. To the knowledge of the Trust,
no other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance New York Limited Maturity Tax
Free Fund to EV Marathon New York Limited Maturity Tax Free Fund on January 1,
1994 and to EV Marathon New York Limited Maturity Municipals Fund on December
15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State and New York City income tax laws in effect for 1997.
<TABLE>
<CAPTION>
COMBINED
FEDERAL,
NY STATE
SINGLE RETURN JOINT RETURN AND NY CITY A FEDERAL, NEW YORK STATE AND NEW YORK CITY TAX EXEMPT YIELD OF:
- --------------------------- ------------------------ TAX ------------------------------------------------------------
(TAXABLE INCOME*) BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------------------------------------- ----------- ------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 24.55% 5.30% 5.96% 6.63% 7.29% 7.95% 8.62% 9.28%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 36.14 6.26 7.05 7.83 8.61 9.40 10.18 10.96
$ 59,751 - $124,650 $ 99,601 - $151,750 38.80 6.54 7.35 8.17 8.99 9.80 10.62 11.44
$124,651 - $271,050 $151,751 - $271,050 43.24 7.05 7.93 8.81 9.69 10.57 11.45 12.33
Over $271,050 Over $271,050 46.43 7.47 8.40 9.33 10.27 11.20 12.13 13.07
* Net amount subject to federal, New York State and New York City personal income tax (including New York City personal income
tax surcharges) after deductions and exemptions.
+ The first combined tax bracket is calculated using the highest State rate (6.85%) and the highest City rate (including
surcharges) within the bracket. Taxpayers with taxable income below the highest dollar amount in the first bracket may have a
lower combined tax bracket and taxable equivalent yield than indicated above. The applicable State and City rates are at their
maximum (6.85% and 4.457%, respectively) throughout all other brackets. The applicable federal tax rates within each of these
combined tax brackets are 15%, 28%, 31%, 36%, and 39.6% over the same ranges of income.
</TABLE>
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State income tax laws in effect for 1997.
<TABLE>
<CAPTION>
COMBINED
FEDERAL AND
SINGLE RETURN JOINT RETURN NY STATE A FEDERAL AND NEW YORK STATE TAX EXEMPT YIELD OF:
- ---------------------------- -------------------------- TAX ------------------------------------------------------------
(TAXABLE INCOME*) BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- -------------------------------------------------------- ----------- ------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.82% 5.05% 5.68% 6.31% 6.95% 7.58% 8.21% 8.84%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$ 59,751 - $124,650 $ 99,601 - $151,750 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.89
$124,651 - $271,050 $151,751 - $271,050 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74
Over $271,050 Over $271,050 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44
* Net amount subject to federal and New York State personal income tax after deductions and exemptions.
+ The first combined tax bracket is calculated using the highest New York State rate (6.85%) within the bracket. Taxpayers with
taxable income below the highest dollar amount in the first bracket may have a lower combined tax bracket and taxable
equivalent yield than indicated above. The applicable State rate is the maximum rate, 6.85%, throughout all other brackets.
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.
</TABLE>
Note: Yields shown are for illustration purposes only and are not meant to
represent the Fund's actual yield. No assurance can be given that the Fund will
achieve any specific tax exempt yield. While it is expected that the Portfolio
will invest principally in obligations, the interest from which is exempt from
the regular federal income tax and New York State and New York City personal
income taxes, other income received by the Portfolio and allocated to the Fund
may be taxable. The table does not take into account state or local taxes, if
any, payable on Fund distributions except for New York State and New York City
personal income taxes. It should also be noted that the interest earned on
certain "private activity bonds" issued after August 7, 1986, while exempt from
the regular federal income tax, is treated as a tax preference item which could
subject the recipient to the federal alternative minimum tax. The illustrations
assume that the federal alternative minimum tax is not applicable and do not
take into account any tax credits that may be available.
The above-indicated combined federal and New York State/City income brackets
assume State and City taxes are itemized deductions and do not take into account
the effect of a reduction in the deductibility of itemized deductions (including
New York State and City income taxes) for taxpayers with adjusted gross income
in excess of $121,200, nor do they reflect phaseout of personal exemptions for
single and joint filers with adjusted gross income in excess of $121,200 and
$181,800, respectively. The effective combined tax brackets and equivalent
taxable yields of taxpayers who do not itemize or who are subject to such
limitations will be higher than those indicated above. In addition, investors
who do not itemize deductions on their federal income tax returns will have
higher combined brackets and equivalent taxable yields than indicated above.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON OHIO LIMITED MATURITY
MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Ohio considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Ohio issuers. Such information supplements the information in the Prospectus and
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 Ohio issuers. Neither
the Trust nor the Portfolio has independently verified this information.
The State of Ohio operates on the basis of a fiscal biennium for its
appropriations and expenditures. The State is effectively prohibited by law from
ending a fiscal year or a biennium in a deficit position. The Governor has the
power to order State agencies to operate within the State's means. The State
carries out most of its operations through the General Revenue Fund ("GRF")
which receives general State revenues not otherwise dedicated. GRF revenues are
derived mainly from personal income and sales taxes and corporate franchise
taxes. State GRF figures generally show a pattern related to national economic
conditions, evident in growth and depletion of its GRF ending fund balances,
with the June 30 (end of fiscal year) GRF fund balance reduced during less
favorable national economic periods and increased during more favorable economic
periods.
The general appropriations act for the 1994-95 biennium appropriated $30.7
billion for GRF purposes. Appropriations for the first fiscal year of the
biennium were approximately 9.2% above those for fiscal year 1993 while those
for the second year were approximately 6.6% higher than those for fiscal year
1994. These additional appropriations were mainly for increased costs in most
State financed programs such as education, Medicaid, mental health and
corrections. During the 1992-1993 biennium, the national economic downturn
required a $300.2 million transfer from the Budget Stabilization Fund ("BSF") to
the GRF. As fiscal year 1992 progressed, reduced tax collections led to a
revenue shortfall. This, in combination with additional expenditures, produced a
budget deficit. The State addressed this deficit through a combination of budget
cuts, tax payment accelerations and a depletion of the BSF. A projected fiscal
year 1993 gap of $520 million was covered through a combination of tax increases
and a reduction in appropriations. The fiscal year 1994 budget was balanced. The
1996-97 biennial budget calls for GRF expenditures to increase 9.1% over the
1995-96 biennium.
For fiscal year ended June 30, 1996, the BSF was up to $828.3 million and
the GRF had a $781 million fund balance.
Local school districts in Ohio receive a major portion of their operating
monies from State subsidies, but are dependent upon local taxes for significant
portions of their budgets. School districts may submit for voter approval income
taxes on the district income of individuals and estates. To date, this income
tax has been approved in 119 of the State's 600+ local school districts. A small
number of local school districts have in any year required special assistance
from the State under a prior program in order to avoid year-end deficits.
Forty-four school districts borrowed $68.6 million in fiscal year 1992 and 27
districts borrowed $94.5 million in 1993, including Cleveland which borrowed $75
million. Twenty-eight districts borrowed $41.1 million in fiscal year 1994,
twenty-nine districts borrowed $71.1 million in fiscal year 1995 and twenty
districts borrowed $87 million in fiscal year 1996. Schools were affected by
budget-balancing expenditure reductions discussed above.
Litigation, similar to that in other states, has been pending questioning
the constitutionality of Ohio's system of school funding. The Ohio Supreme Court
concluded that aspects of the system (including basic operating assistance) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order for a year to permit
time for responsive corrective actions. At this time, it is not possible to
determine either the outcome or the financial burden which an unfavorable
decision would have on either the State's or the local school districts"
financial health.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $28,469,852. For the
fiscal years ended March 31, 1997 and 1996, the Portfolio paid BMR advisory fees
of $146,515 and $173,867, respectively (equivalent to 0.48% and 0.47%,
respectively, of the Portfolio's average daily net assets for each such year).
For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $185,368 (equivalent to 0.46% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of its advisory fee in the amount of
$44,856. The Portfolio's Investment Advisory Agreement with BMR is dated April
9, 1993 and may be continued as described under "Investment Adviser and
Administrator in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $19,479 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $206,303 and the Principal Underwriter
received approximately $78,000 in CDSCs imposed on early redeeming shareholders.
These payments reduced uncovered distribution charges under the Plan. As at
March, 31, 1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $505,100. During
the fiscal year ended March 31, 1997, the Fund made service fee payments under
the Plan aggregating $37,148 for Class I shares, of which $37,090 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $492.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and1996, the Portfolio paid
brokerage commissions of $14,023 and $2,992, respectively, on portfolio security
transactions aggregating $98,188,413 and $26,785,801, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $35 $346(2) $145,000(5)
Samuel L. Hayes, III .................... 31 315(3) 155,000(6)
Norton H. Reamer ........................ 31 313 145,000
John L. Thorndike ....................... 32 322(4) 148,750(7)
Jack L. Treynor ......................... 35 346 150,000
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $153 of deferred compensation.
(3) Includes $52 of deferred compensation.
(4) Includes $158 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from April 16, 1993 through March 31, 1997, and for the one-year period ended
March 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC*** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 4/16/93* $1,000 $1,153.66 $1,143.84 15.37% 3.68% 14.38% 3.45%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,038.90 $1,008.96 3.89% 3.89% 0.90% 0.90%
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.
- ----------
* Investment operations began on April 16, 1993.
** If a portion of the Portfolio's and/or the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.01%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.01% would be 6.23%, assuming a
combined federal and State tax rate of 35.76%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
TAXES
In the opinion of special tax counsel to the Fund, Squire, Sanders & Dempsey
L.L.P., under Ohio law, provided that the Fund continues to qualify as a
regulated investment company under the Code and that at all times at least 50%
of the value of the total assets of the Fund consists of obligations issued by
or on behalf of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of Ohio or its political subdivisions ("Ohio Obligations"), or
similar obligations of other states or their subdivisions (a fund satisfying
such requirements being referred to herein as an "Ohio fund"), distributions
paid by the Fund with respect to shares ("Distributions") that are properly
attributable to interest payments on Ohio Obligations will be exempt from Ohio
personal income tax and any municipal and school district income taxes in Ohio.
In addition, Distributions of "capital gain dividends," as defined in the Code,
that are properly attributable to the Fund's capital gains on the sale, exchange
or other disposition of Ohio Obligations, will be exempt from Ohio personal
income tax and any municipal or school district income taxes in Ohio. Except as
described below, other Distributions will generally not be exempt from Ohio
personal income tax and municipal and school district income taxes in Ohio.
Provided the Fund qualifies as an Ohio fund, Distributions will be excluded
from the net income base of the Ohio corporation franchise tax to the extent
that such Distributions (i) represent exempt-interest dividends for federal
income tax purposes or (ii) are properly attributable to interest payments on
Ohio Obligations or profit on the sale, exchange or other disposition of Ohio
Obligations. However, shares of the Fund will not be excluded from the net worth
base for purposes of the Ohio corporation franchise tax.
Provided the Fund qualifies as an Ohio fund, distributions by the Fund that
are properly attributable to interest on obligations of the United States or the
governments of Puerto Rico, the Virgin Islands or Guam or their authorities or
municipalities are exempt from Ohio personal income tax and any municipal and
school district income taxes in Ohio, and are excluded from the net income base
of the Ohio corporate franchise tax to the same extent that such interest would
be so exempt or excluded if the obligations were held directly by the
shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246, was the record owner of approximately 7.93% and 11.63%, respectively, of
the outstanding Class I and Class II 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 June 30,
1997, Key Clearing Corp., a/c 1001-7568 and David M. Bartlett TTEE, David M.
Bartlett Trust, dated 5/4/93, Cincinnati, OH owned beneficially and of record
8.70% and 5.75%, respectively, of the outstanding Class I and Class II shares of
the Fund. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Ohio Limited Maturity Tax Free
Fund to EV Marathon Ohio Limited Maturity Tax Free Fund on August 1, 1994 and to
EV Marathon Ohio Limited Maturity Municipals Fund dated December 15, 1995.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Ohio State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND OHIO STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- OHIO STATE -------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 19.42% 4.96% 5.58% 6.21% 6.83% 7.45% 8.07% 8.69%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.28 5.91 6.64 7.38 8.12 8.86 9.60 10.34
$ 59,751 - $124,650 $ 99,601 - $151,750 35.76 6.23 7.01 7.78 8.56 9.34 10.12 10.90
$124,651 - $271,050 $151,751 - $271,050 40.80 6.76 7.60 8.45 9.29 10.14 10.98 11.82
Over $271,050 Over $271,050 44.13 7.16 8.05 8.95 9.84 10.74 11.63 12.53
* Net amount subject to federal and Ohio personal income tax after deductions and exemptions.
+ The combined tax brackets are calculated using the highest Ohio State rate within the bracket. The combined tax brackets
assume that Ohio taxes are itemized deductions for federal income tax purposes. Investors who do not itemize deductions on
their federal income tax return will have a higher combined bracket and higher taxable equivalent yield than those indicated
above. The applicable federal tax rates within each of these combined brackets are 15%, 28%, 31%, 36% and 39.6% over the same
ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Ohio State income taxes) for
taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax and Ohio personal income taxes, other income received
by the Portfolio and allocated to the Fund may be taxable. The table does not
take into account state or local taxes, if any, payable on Fund distributions
except for Ohio personal income taxes. It should also be noted that the interest
earned on certain "private activity bonds" issued after August 7, 1986, while
exempt from the regular federal income tax, is treated as a tax preference item
which could subject the recipient to the federal alternative minimum tax. The
illustrations assume that the federal alternative minimum tax is not applicable
and do not take into account any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON PENNSYLVANIA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Pennsylvania considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in Pennsylvania issuers. Such information supplements the information in the
Prospectus and 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
Pennsylvania issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Pennsylvania historically has been identified as a heavy industry state,
although that reputation has changed with the decline of the coal, steel and
railroad industries and the resulting diversification of Pennsylvania's
industrial composition. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania continues, however, to have a greater percentage of
its workers employed in manufacturing than the national average, leaving the
economy somewhat cyclical and vulnerable to recessionary forces. During 1995,
manufacturing accounted for 18% of employment. As of March, 1997, the unadjusted
unemployment rate for Pennsylvania was 5.4%. Per capita income in Pennsylvania
for 1995 of $23,558 was higher than the per capita income of the United States
of $23,208.
Revenues and Expenditures. Pennsylvania utilizes the fund method of accounting.
The General Fund, the State's largest fund, receives all tax receipts, revenues,
federal grants and reimbursements that are not specified by law to be deposited
elsewhere. Debt service on all obligations, except those issued for highway
purposes or for the benefit of other special revenue funds, is payable from the
General Fund. The General Fund closed fiscal year 1996 with a balance of $635
million.
For 1997, the Commonwealth expects a slight improvement in the State's
financial position. The 1997 budget provides for only a 0.6% increase in
expenditures. As of date, revenues were better than expected but a slow down in
collections is expected. State enacted welfare reform has enabled the
Administration to limit expenditure growth. The 1998 proposed budget calls for a
2.9% increase in expenditures.
The Pennsylvania Constitution requires all proceeds of motor fuels taxes,
vehicle registration fees, license taxes, operators" license fees and other
excise taxes imposed on products used in motor transportation to be used
exclusively for construction, reconstruction, maintenance and repair of and
safety on highways and bridges and for the payment of debt service on
obligations incurred for such purposes. The Motor License Fund is the fund
through which such revenues are accounted for and expended.
Pennsylvania Debt. The current Constitutional provisions pertaining to the
Pennsylvania debt permit the issuance of the following types of debt: (i) debt
to suppress insurrection or rehabilitate areas affected by disaster, (ii)
electorate approved debt, (iii) debt for capital projects subject to an
aggregate debt limit of 1.75 times the annual average tax revenues of the
preceding five fiscal years (this debt need not be approved by the electorate)
and (iv) tax anticipation notes payable in the fiscal year of issuance. All debt
except tax anticipation notes must be amortized in substantial and regular
amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes, which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
outstanding, may not exceed in the aggregate 20% of the revenues estimated to
accrue to the appropriate fund in the fiscal year. The State is not permitted to
fund deficits between fiscal years with any form of debt. All year end deficit
balances must be funded within the succeeding fiscal year's budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-Related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of or revenues derived from the various projects
financed; it is not an obligation of the State. Some of these agencies, however,
are indirectly dependent on state appropriations. State- related agencies and
their outstanding debt as of December 31, 1996 include the Delaware River Joint
Toll Bridge Commission ($53.9 million), the Delaware River Port Authority
($523.8 million), the Pennsylvania Economic Development Financing Authority
($1,371.5 million), the Pennsylvania Energy Development Authority ($118.0
million), the Pennsylvania Higher Education Assistance Agency ($1,408.8
million), the Pennsylvania Higher Education Facilities Authority ($2,667.1
million), the Pennsylvania Industrial Development Authority ($416.2 million),
the Pennsylvania Infrastructure Investment Authority ($205.9 million), the
Pennsylvania Turnpike Commission ($1,205.8 million), the Philadelphia Regional
Port Authority ($61.1 milliion) and the State Public School Building Authority
($324.0 million).
The only obligations of state-created agencies in Pennsylvania which bear a
moral obligation of the state are those issued by the Pennsylvania Housing
Finance Agency, a state-created agency which provides housing for lower and
moderate income families in the state, which had $2,357.9 million in bonds
outstanding at December 31, 1996, and the Hospitals and Higher Education
Facilities Authority of Philadelphia which issued $21.1 million in bonds in
1993.
Litigation. Pennsylvania is currently involved in certain litigation where
adverse decisions could have an adverse impact on its ability to pay debt
service. In Baby Neal v. Commonwealth, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. County of
Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In Pennsylvania Association of Rural and Small Schools v.
Casey, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Local Government Debt. Local government in Pennsylvania consists of numerous
individual units. Each unit is distinct and independent of other local units,
although they may overlap geographically.
There is extensive general legislation applying to local government. For
example, the Local Government Unit Debt Act provides for uniform debt limits for
local government units, including municipalities and school districts, and
prescribes methods of incurring, evidencing, securing and collecting debt. Under
the Local Government Unit Debt Act, the ability of Pennsylvania municipalities
and school districts to engage in general obligation borrowing without electoral
approval is generally limited by their recent revenue collection experience.
Generally such subdivisions can levy real property taxes unlimited as to rate or
amount to pay debt service on general obligation borrowings.
Municipalities may also issue revenue obligations without limit and without
affecting their general obligation borrowing capacity if the obligations are
projected to be paid solely from project revenues.
Municipal authorities and industrial development authorities are widespread
in Pennsylvania. An authority is organized by a municipality acting singly or
jointly with another municipality and is governed by a board appointed by the
governing unit of the creating municipality or municipalities. Typically,
authorities are established to acquire, own and lease or operate one or more
projects and to borrow money and issue revenue bonds to finance them.
As of the date of this Statement of Additional Information, the City of
Philadelphia's general obligations are rated Ba, B and BB, by Moody's, S&P and
Fitch, respectively.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $67,875,607. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $375,224, $478,819 and $554,521, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $29,738 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $443,211 and the Principal Underwriter
received approximately $164,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$348,000. During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $101,403 for Class I shares and $6,763 for
Class II shares, of which $101,041 and $6,703, respectively, was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $1,780 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $34,923 and $7,542, respectively, on portfolio security
transactions aggregating $365,165,141 and $67,553,927, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ....................... $346 $1,141(2) $145,000(5)
Samuel L. Hayes, III ................... 315 1,431(3) 155,000(6)
Norton H. Reamer ....................... 313 1,311 145,000
John L. Thorndike ...................... 322 1,432(4) 148,750(7)
Jack L. Treynor ........................ 346 1,381 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Timothy T. Browse (38) is a Vice President
of the Portfolio. Mr. Browse has served as a Vice President of the Portfolio
since it commenced operations. Mr. Browse has been a Vice President of BMR and
Eaton Vance since 1993 and an employee of Eaton Vance since 1992. Mr. Browse
is an officer of various investment companies managed by Eaton Vance or BMR.
Prior to joining Eaton Vance, Mr. Browse was a Municipal Bond Trader -
Fidelity Management & Research Company (1987-1992).
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from June 1, 1992 through March 31, 1997 and the one-year period ended March 31,
1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC*** -------------------------- ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund** 6/1/92* $1,000 $1,246.95 $1,246.95 24.70% 4.68% 24.70% 4.68%
1 Year
Ended
3/31/97 3/31/96 $1,000 $1,031.22 $1,001.49 3.12% 3.12% 0.15% 0.15%
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.
- ------------
* Investment operations began on June 1, 1992.
** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
*** No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.88%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.88% would be 6.47%, assuming a
combined federal and State tax rate of 40.05%.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 16.85% and 29.53%, respectively, of
the outstanding Class I and Class II shares, which it 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. To the knowledge of the Trust,
no other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from Eaton Vance Pennsylvania Limited Maturity Tax
Free Fund to EV Marathon Pennsylvania Limited Maturity Tax Free Fund on January
11, 1994 and to EV Marathon Pennsylvania Limited Maturity Municipals Fund on
December 15, 1995.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding 6% under the regular federal income tax and Pennsylvania
State and local tax laws in effect for 1997.
<TABLE>
<CAPTION>
TAXABLE YIELD NEEDED TO MATCH 6% FREE OF
------------------------------------------------
FEDERAL, STATE,
TAXABLE INCOME FEDERAL FEDERAL, STATE COUNTY AND
- --------------------------------------------------- FEDERAL STATE AND STATE AND COUNTY PHILADELPHIA
SINGLE RETURN JOINT RETURN INCOME TAX INCOME TAX TAXES TAXES (1) TAXES (2)
- -------------------------- ----------------------- ------------- ------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 15.00% 2.80% 7.26% 7.80% 8.24%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 28.00 2.80 8.57 9.20 9.72
$ 59,751 - $124,650 $ 99,601 - $151,750 31.00 2.80 8.95 9.60 10.15
$124,651 - $271,050 $151,751 - $271,050 36.00 2.80 9.65 10.36 10.94
Over $271,050 Over $271,050 39.60 2.80 10.22 10.97 11.59
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Equivalent yields are based on a fixed $1,000 investment with all taxes deducted
from income. Included in all areas are the effects of: federal income tax and a
2.8% Pennsylvania income tax. (1) Includes a 4 mil county personal property tax
imposed by most counties; and (2) Includes a 4 mil county personal property tax
and a 4.84% Philadelphia school income tax. The equivalent yields assume that
the Pennsylvania state and local taxes referred to above are itemized deductions
for federal income tax purposes. Investors who do not itemize deductions on
their federal income tax return will have a higher equivalent yield than
indicated.
Note: The above-indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions (including
Pennsylvania State and local taxes) for taxpayers with adjusted gross income in
excess of $121,200. The tax brackets and taxable equivalent yields also do not
show the effects of phaseout of personal exemptions for single filers with
adjusted gross income in excess of $121,200 and joint filers with adjusted gross
income in excess of $181,800. The effective federal tax brackets and equivalent
taxable yields of such taxpayers will be higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Pennsylvania state and local income taxes, other
income received by the Portfolio and allocated to the Fund may be taxable. It
should also be noted that the interest earned on certain "private activity
bonds" issued after August 7, 1986, while exempt from the regular federal income
tax, is treated as a tax preference item which could subject the recipient to
the federal alternative minimum tax. The illustrations assume the federal
alternative minimum tax is not applicable and do not take into account any tax
credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
- -------------------------------------------------------------------------------
[LOGO]
EATON VANCE
- ------------------
Mutual Funds
- -------------------------------------------------------------------------------
EV MARATHON LIMITED MATURITY MUNICIPAL FUNDS
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
AUGUST 1, 1997
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EV MARATHON
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-LC8/1SAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV TRADITIONAL LIMITED MATURITY MUNICIPAL FUNDS
<TABLE>
<S> <C>
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
</TABLE>
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about the Funds listed above (each a "Fund"), its
corresponding Portfolio and certain other series of Eaton Vance Investment Trust
(the "Trust"). Each Part II provides information solely about a Fund and its
corresponding Portfolio. Where appropriate, Part I includes cross-references to
the relevant sections of Part II that provide additional Fund- specific
information. This Statement of Additional Information is sometimes referred to
herein as the "SAI."
TABLE OF CONTENTS
PART I
Page
Additional Information about Investment Policies .................... 1
Investment Restrictions ............................................. 7
Trustees and Officers ............................................... 9
Investment Adviser and Administrator ................................ 10
Custodian ........................................................... 13
Services for Accumulation ........................................... 13
Service for Withdrawal .............................................. 14
Determination of Net Asset Value .................................... 14
Investment Performance .............................................. 15
Taxes ............................................................... 16
Principal Underwriter ............................................... 18
Service Plan ........................................................ 19
Portfolio Security Transactions ..................................... 19
Other Information ................................................... 21
Independent Certified Public Accountants ............................ 22
Financial Statements ................................................ 22
Appendix ............................................................ 24
PART II
EV Traditional California Limited Maturity Municipals Fund .......... a-1
EV Traditional Connecticut Limited Maturity Municipals Fund ......... b-1
EV Traditional Florida Limited Maturity Municipals Fund ............. c-1
EV Traditional Michigan Limited Maturity Municipals Fund ............ d-1
EV Traditional New Jersey Limited Maturity Municipals Fund .......... e-1
EV Traditional New York Limited Maturity Municipals Fund ............ f-1
EV Traditional Ohio Limited Maturity Municipals Fund ................ g-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 AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS 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 Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986, for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986, which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. In assessing the federal
income tax treatment of interest on any municipal obligation, the Portfolio will
generally rely on an opinion of the issuer's counsel (when available) and will
not undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, the Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 other than, in general, at their original
issue, is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue
at a price less than (i) the stated principal amount payable at maturity, in the
case of an obligation that does not have original issue discount or (ii) in the
case of an obligation that does have original issue discount, the sum of the
issue price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are normally secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Such payments are usually subject to annual
appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
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 municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. 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 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 municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment, general
money market conditions, general conditions of the municipal bond market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of Moody's, S&P and Fitch represent their opinions as to the quality
of the municipal obligations which they undertake to rate. It should be
emphasized, however, that ratings are based on judgment and are not absolute
standards of quality. Consequently, municipal obligations with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield. In
addition, the market price of municipal 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
Municipal Obligations of a Particular State. For a discussion of the risks
associated with the Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of Concentration"
in the Fund's Part II.
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or more
of its total assets in municipal obligations of the same type. There could be
economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in industrial revenue
bonds might involve (without limitation) the following risks.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. Among the influences
affecting a hospital's gross receipts and net income available to service its
debt are demand for hospital services, the ability of the hospital to provide
the services required, management capabilities, economic developments in the
service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices, and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
Obligations of Puerto Rico, U.S. Virgin Islands and Guam. Subject to the
Fund's investment policies as set forth in its 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, the U.S. Virgin
Islands and Guam affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross domestic
product and is more diversified than during earlier phases of Puerto Rico's
industrial development. The three largest sectors of the economy (as a
percentage of employment) are services (47%), government (22%) and manufacturing
(16.4%). These three sectors represent 37.5%, 11% and 41.8%, respectively, of
the gross domestic product. The service sector is the fastest growing, followed
by manufacturing which has begun to show signs of expansion. The North American
Free Trade Agreement ("NAFTA"), which became effective January 1, 1994, could
lead to the loss of Puerto Rico's lower salaried or labor intensive jobs to
Mexico.
The Commonwealth of Puerto Rico exercises virtually the same control over
its internal affairs as do the fifty states; however, it differs from the states
in its relationship with the federal government. Most federal taxes, except
those such as social security taxes that are imposed by mutual consent, are not
levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget plan,
Section 936 of the Code was amended and provided for two alternative limitations
to the Section 936 credit. The first option will limit the credit against such
income to 40% of the credit allowable under then current law, with a five year
phase-in period starting at 60% of the allowable credit. The second option was a
wage and depreciation based credit. Additional amendments to Section 936 in 1996
imposed caps on these credits, beginning in 1998 for the first option and
beginning in 2002 for the second option. More importantly, the 1996 amendments
eliminated both options for taxable years beginning in 2006. The eventual
elimination of tax benefits to those U.S. companies with operations in Puerto
Rico may lead to slower growth in the future. There can be no assurance that
this will not lead to a weakened economy, a lower rating on Puerto Rico's debt
or lower prices for Puerto Rican bonds that may be held by the Portfolio in the
long-term. Short-term affects are minimal.
Puerto Rico's financial reporting was first conformed to generally accepted
accounting principles in fiscal 1990. Nonrecurring revenues have been used
frequently to balance recent years' budgets. In November, 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. Puerto Ricans voted to retain Commonwealth
status, leaving intact the current relationship with the federal government.
There can be no assurance that the statehood issue will not be brought to a vote
in the future. A successful statehood vote in Puerto Rico would then require the
U.S. Congress to ratify the election.
The United States Virgin Islands (USVI) are located approximately 1,100
miles east-southeast of Miami and are made up of St. Croix, St. Thomas and St.
John. The economy is heavily reliant on the tourism industry, with roughly 43%
of non-agricultural employment in tourist-related trade and services. In 1996,
unemployment stood at 13.8%. The tourism industry is economically sensitive
and would likely be adversely affected by a recession in either the United
States or Europe.
An important component of the USVI revenue base is the federal excise tax on
rum exports. Tax revenues rebated by the federal government to the USVI provide
the primary security of many outstanding USVI bonds. Since more than 90% of the
rum distilled in the USVI is distilled at one plant, any interruption in its
operations (as occurred after Hurricane Hugo in 1989) would adversely affect
these revenues. Consequently, there can be no assurance that rum exports to the
United States and the rebate of tax revenues to the USVI will continue at their
present levels. The preferential tariff treatment the USVI rum industry
currently enjoys could be reduced under NAFTA. Increased competition from
Mexican rum producers could reduce USVI rum imported to the U.S., decreasing
excise tax revenues generated. The USVI is periodically hit by hurricanes.
Several hurricanes have caused extensive damage, and a drop in tourism, which
has had a negative impact on revenue collections. There is currently no rated,
unenhanced Virgin Islands debt outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles southeast of
Tokyo. The U.S. military is a key component of Guam's economy. The federal
government directly comprises more than 10% of the employment base, with a
substantial component of the service sector to support these personnel. The
Naval Air Station, one of several U.S. military facilities on the island, has
been slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the Island's
commercial airport. Guam is also heavily reliant on tourists, particularly the
Japanese. For 1995, the government realized a General Fund operating surplus.
The administration has taken steps to improve its financial position; however,
there are no guarantees that an improvement will be realized. Guam's general
obligation debt is rated BBB by S&P with a negative outlook.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the government issuer) have
evolved as a means for government issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will be responsible for determining the credit quality of
such obligation on an on-going basis, including an assessment of the likelihood
that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by 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 municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by the
Portfolio.
SHORT-TERM TRADING
The Portfolio may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase and later sell securities
in anticipation of a market rise (a decline in interest rates). In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Portfolio believes to be a temporary disparity in the
normal yield relationship between the two securities. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the overall
demand for or supply of various types of municipal obligations or changes in the
investment objectives of investors. Such trading may be expected to increase the
portfolio turnover rate, which may increase capital gains and the expenses
incurred in connection with such trading. The Portfolio anticipates that its
annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less). 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. For the Portfolio turnover rate of the Portfolio, see "Supplementary
Data" in the Portfolio's financial statements included in the Fund's annual
report.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of 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 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 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 1940 Act 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. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations 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. Because this right is assignable with the security, which is
readily marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
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. Interest income generated by
certain bonds having put or demand features may not qualify as tax-exempt
interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. The Portfolio
would have the right to call a loan and obtain the securities loaned at any time
on up to five business days' notice. During the existence of a loan, the
Portfolio will continue to receive the equivalent of the interest paid by the
issuer on the securities loaned and will also receive a fee, or all or a portion
of the interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. The Portfolio would not have the right
to vote any securities having voting rights during the existence of the loan,
but would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be of
good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, net of
administration expenses and other finder's fees, 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.
FUTURES CONTRACTS AND OPTIONS ON 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, the Portfolio may enter into (i)
futures contracts for the purchase or sale of debt securities, and (ii) futures
contracts on securities indices. All futures contracts entered into by 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. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. 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 Code for maintaining qualification of
the Fund as a regulated investment company for federal income tax purposes (see
"Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or futures
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid
securities in a segregated account with its custodian in the prescribed amount.
The securities in the segregated account will be marked to market daily. Assets
used as cover or held in a segregated account maintained by the custodian cannot
be sold while the position requiring coverage or segregation is outstanding
unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Portfolio's assets to segregated accounts
or cover could impede portfolio management or the Portfolio's ability to meet
redemption requests or other current obligations.
SHORT-TERM OBLIGATIONS
Although the Portfolio will normally attempt to invest substantially all of
its assets in municipal 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, AMT and/or State
taxes. Such short-term taxable obligations may include, but are not limited to,
certificates of deposit, commercial paper, short-term notes and obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. During periods of adverse market conditions, the Portfolio
may temporarily invest more than 20% of its assets in such short-term taxable
obligations, all of which will be high quality.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund 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 SAI 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. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
lnvestment Company Act of 1940;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests in
real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest or
deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, or (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.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or with respect to the Portfolio by the Trustees of the
Portfolio without the approval of the Fund or its other investors. As a matter
of nonfundamental policy, the Fund and the Portfolio will not: (a) engage in
options, futures or forward transactions if more than 5% of its net assets, as
measured by the aggregate of the premiums paid by the Fund or the Portfolio,
would be so invested; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and unless not more than
25% of the Fund's net assets (taken at current value) is held as collateral for
such sales at any one time. (The Fund and the Portfolio will make such sales
only for the purpose of deferring realization of gain or loss for federal income
tax purposes); or (c) invest more than 15% of its net assets in investments
which are not readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 and commercial paper
issued pursuant to Section 4(2) of said Act that the Board of Trustees of the
Trust or the Portfolio, or its delegate, determines to be liquid.
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 Investment Adviser on the basis of the characteristics of
the obligation and other relevant factors, the most significant of which is the
source of funds committed to meeting interest and principal payments of such
obligations.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change below investment grade made by a rating service, will not compel the Fund
or the Portfolio, as the case may be, to dispose of such security or other
asset. Where applicable and notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 65% of total assets in a particular state.
Moreover, the Fund and Portfolio must always be in compliance with the borrowing
policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the 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 Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust or the Portfolio as defined in the 1940
Act by virtue of their affiliation with Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected 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 (40), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV, and an
employee of Eaton Vance since March 8, 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 (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March
27, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary on June 19,
1995.
For any additional officers of the Portfolio, see "Additional Officer
Information" in the Funds Part II.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the 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. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in the Fund's Part II.
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 over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or perservere
with your investments. A professional investment representative can provide you
with tailored financial advice.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying pricing options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion.
The following persons manage one or more of the Eaton Vance limited maturity
municipal portfolios. For the identity of the Portfolio's portfolio manager, see
the Fund's current Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr.
Ahern graduated from Boston College in 1981 with a B.A. in Economics, and
received his M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern
is a member of the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992 to 1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received here
M.B.A., cum laude, from Boston University in 1990. She is a member of the
Boston Municipal Analysts, the Boston Securities Analyst Society and the
Financial Analysts Federation.
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 any legal obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto, to the extent not covered by
insurance.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. 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.
The Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. 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. 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, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with 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 Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
BMR, Eaton Vance and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or officers and Directors of EVC and EV. As
of July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Dynner and Hawkes are
officers or Trustees of the Trust and the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Fetter, MacIntosh,
Murphy, O'Connor and Woodbury and Ms. Anderes, Ms. Clemson and Ms. Sanders,
are officers of the Trust and/or the Portfolio and are also members of the
BMR, Eaton Vance and EV organizations.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns 22% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in precious metal mining venture investment and management. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the 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.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of other
entities in the Eaton Vance organization, owns approximately 13% of the voting
stock of Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Fund or Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is anticipated
that $100,000 or more of Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
current Prospectus of the Fund will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one lump
sum. Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. Any
investor considering signing a Statement of Intention should read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the Fund. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate amount. Shares purchased (i) by an individual,
his spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level.
For any discount to be made available, at the time of purchase a purchaser
or the Authorized Firm must provide the Principal Underwriter (in the case of a
purchase made through an Authorized Firm) or the Transfer Agent (in the case of
an investment made by mail) with sufficient information to permit verification
that the purchase order qualifies for the accumulation privilege. Confirmation
of the order is subject to such verification. The Right of Accumulation
privilege may be amended or terminated at any time as to purchases occurring
thereafter.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal, may require the
recognition of taxable gain or loss. Income dividends and capital gain
distributions in connection with withdrawal plan accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not have
a withdrawal plan in effect at the same time he or she has authorized Bank
Automated Investing or is otherwise making regular purchases of Fund shares. The
shareholder, the Transfer Agent or the Principal Underwriter will be able to
terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of 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 municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transaction prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchased on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Taxable obligations for which price
quotations are readily available normally will be valued at the mean between the
latest available bid and asked prices. Open futures positions on debt securities
are valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees of the Portfolio. Other assets are valued at fair value
using methods determined in good faith by or at the direction of the Trustees of
the Portfolio. The Fund and the Portfolio will be closed for business and will
not price their respective shares or interests on the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the results. The calculation
assumes the maximum initial sales charge is deducted from the initial $1,000
purchase order and that all distributions are reinvested at net asset value on
the reinvestment dates during the period. For further information concerning the
total return of the Fund, see "Performance Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (which includes the maximum initial sales charge) per
share on the last day of the period and annualizing the resulting figure. Net
investment income per share is calculated from the yields to maturity of all
debt obligations held by 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. Yield calculations assume a maximum initial sales
charge equal to 2.25% of the public offering price. Actual yield may be affected
by variations in sales charges on investments. For the yield and
taxable-equivalent yield of the Fund, see "Performance Information" in the
Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or effective distribution rate. The Fund's distribution
rate is computed by dividing the most recent monthly distribution per share
annualized, by the current maximum offering price per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio (the days in a year divided by the accrual days of the monthly period)
used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio, including
the other investment companies.
The Fund may provide investors with information on municipal bond investing,
which may include comparative performance information, evaluations of Fund
performance, charts and/or illustrations prepared by independent sources (such
as Lipper Analytical Services Inc., CDA/Wiesenberger, Morningstar, Inc., The
Bond Buyer, the Federal Reserve Board or The Wall Street Journal). The Fund may
also refer in investor publications to Tax Freedom Day, as computed by the Tax
Foundation, Washington, DC 20005, to help illustrate the value of tax free
investing, as well as other tax-related information. Information, charts and
illustrations showing the effects of inflation and taxes (including their
effects on the dollar and the return on various investments) and compounding
earnings may also be included in advertisements and materials furnished to
present and prospective investors.
Information about portfolio allocation and holdings of 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.
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. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after tax yield (or value) of
such other investment vehicles. Such information may be in the form of
hypothetical illustrations. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-cost associated with aging parents;
-funding a college education (including its actual and estimated cost);
-health care expenses (including actual and projected expenses);
-long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its
ordinary income (including tax-exempt income) and net income (after reduction by
any available capital loss carryforwards) in accordance with the timing
requirements imposed by the Code, so as to maintain its RIC status and to avoid
paying any federal income or excise tax. The Fund so qualified for its fiscal
year ended March 31, 1997. Because the Fund invests its assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to also satisfy these
requirements. 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 RIC, the Fund
(i) will be deemed to own its proportionate share of each of the assets of the
Portfolio and (ii) will be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income (not including
tax-exempt income) for such year, at least 98% of its capital gain net income
(which is the excess of its realized capital gains over its realized capital
losses), generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards and 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 RIC
and the Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
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 securities that it might otherwise have continued to hold
in order to generate cash that the Fund may withdraw from the Portfolio to make
distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto. The
Code is not entirely clear regarding the federal income tax consequences of the
Fund's taking certain positions in connection with ownership of such distressed
securities. For example, the Code is unclear regarding: (i) when the Portfolio
may cease to accrue interest, original issue discount, or market discount; (ii)
when and to what extent deductions may be taken for bad debts or worthless
securities; (iii) how payments received on obligations in default should be
allocated between principal and income; and (iv) whether exchanges of debt
obligations in a workout context are taxable.
Distributions by 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 under Code Section
103(a). For purposes of applying this 50% requirement, the Fund will be deemed
to own its proportionate share of each of the assets of the Portfolio, and the
Portfolio currently intends to invest its assets in a manner such that the Fund
can meet this 50% requirement. Interest on certain municipal obligations is
treated as a tax preference item for purposes of the AMT. Shareholders of 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 discount with respect to certain stripped municipal obligations or
their stripped coupons, and certain realized gains or income attributable to
accrued market discount. Any distributions by the Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the Portfolio and allocated to the Fund. Certain
distributions of the Fund, if declared in October, November or December and paid
the following January, may be taxed to shareholders as if received on December
31 of the year in which they are declared.
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 periods of Portfolio securities,
and conversion of short-term capital losses 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 RIC status for federal income tax
purposes.
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 disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax convention. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own tax
advisers with respect to special tax rules that may apply in their particular
situations, as well as the state, local and, where applicable, foreign tax
consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund Shares").
Such table is applicable to purchases of the Fund alone or in combination with
purchases of certain other funds offered by the Principal Underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter, through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase (see "Services for Accumulation") .
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company. Shares may be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor chlldren. Shares of
the Fund may also be sold at net asset value to registered representatives and
employees of Authorized Firms and to the spouses and children under the age of
21 and beneficial accounts of such persons.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne by
the Principal Underwriter. The fees end 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. The Distribution
Agreement is renewable annually by the Trust's Board of Trustees (including a
majority of the noninterested Trustees) may be terminated on six months' notice
by either party and is automatically terminated upon assignment. The Principal
Underwriter distributes 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 Principal
Underwriter allows Authorized Firms discounts from the applicable public
offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. See "How to Buy Fund Shares" in the Prospectus for the discount
allowed to Authorized Firms on the sale of Fund shares. During periods when the
discount includes the full sales charge, such Authorized Firms may be deemed to
be underwriters as that term is defined in the Securities Act of 1933. See "Fees
and Expenses" in the Part II for the sales charge paid to the Principal
Underwriter and Authorized Firms.
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.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the sales charge rule of the
NASD. (Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Fund's Prospectus.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Plan Trustees")
and (ii) all of the Trustees then in office cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan. The Plan may be
terminated any time by vote of a majority of the Plan Trustees or by a vote of a
majority of the outstanding voting securities of the Fund.
The Plan requires quarterly Trustee review of a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plan may not be amended to increase materially the payments described herein
without approval of the shareholders of the Fund and Trustees. So long as the
Plan is in effect, the selection and nomination of the noninterested Trustees
shall be committed to the discretion of such Trustees. The Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. For additional information
concerning the service fee, see "Fees and Expenses -- Service Plan" in the
Fund's Part II.
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 commission or spread, 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 compensation 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.
(the "NASD"), which rule provides that no firm which is a member of the NASD
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the 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.
OTHER INFORMATION
The Trust is organized as a Massachusetts business trust under a Declaration
of Trust dated October 23, 1985, as amended, and was originally called Eaton
Vance California Municipals Trust. The Trust changed its name to Eaton Vance
Investment Trust on April 28, 1992. Eaton Vance, pursuant to its agreement with
the Trust, controls the use of the words "Eaton Vance" and "EV" in the Fund's
name and may use the words "Eaton Vance" or "EV" in other connections and for
other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
In accordance with the Declaration of Trust of 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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless removed
by action of the investors in accordance with the Portfolio's Declaration of
Trust, the Trustees shall continue to hold office and may appoint successor
Trustees.
The Declaration of Trust of 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.
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.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
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 Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolios listed below for the fiscal year ended March 31,
1997, as previously electronically filed with the Commission:
EV Traditional California Limited Maturity Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
California Limited Maturity Municipals Portfolio
Connecticut Limited Maturity Municipals Portfolio
Florida Limited Maturity Municipals Portfolio
Michigan Limited Maturity Municipals Portfolio
New Jersey Limited Maturity Municipals Portfolio
New York Limited Maturity Municipals Portfolio
Ohio Limited Maturity Municipals Portfolio
(Accession No. 0000950146-97-000902)
<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.
- -----------------
+ 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.
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 to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short-term credit risk and long-term risk. Factors effecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short-term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
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, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree pf speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk 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
that 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 Standard & Poor's 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: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating. Notes
maturing beyond 3 years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues determined
to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. 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 TRADITIONAL CALIFORNIA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain California considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in California issuers. Such information supplements the information in the
Prospectus and 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
California issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Economic Factors
Fiscal Years Prior to 1996-97. By the close of the 1989-90 Fiscal Year,
California's revenues had fallen below projections so that the State's budget
reserve, the Special Fund for Economic Uncertainties (the "Special Fund"), was
fully depleted by June 30, 1990. A recession which had begun in mid-1990,
combined with higher health and welfare costs driven by the State's rapid
population growth, adversely affected General Fund revenues and raised
expenditures above initial budget appropriations.
As a result of these factors and others, the State confronted a period of
budget imbalance. Beginning with the 1990-91 Fiscal Year and for several years
thereafter, the budget required multibillion dollar actions to bring projected
revenues and expenditures into balance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in the Special Fund -- approaching $2.8 billion at
its peak on June 30, 1993.
By the 1993-94 Fiscal Year, the accumulated deficit was too large to be
prudently retired in one year and a two-year program was implemented. This
program used revenue anticipation warrants to carry a portion of the deficit
over to the end of the fiscal year.
The 1994-95 Budget Act projected General Fund revenues and transfers of
$41.9 billion. Expenditures were projected to be $40.9 billion -- an increase of
$1.6 billion over the prior year. As a result of the improving economy, however,
the fiscal year ultimately produced revenues and transfers of $42.7 billion
which more than offset expenditures of $42.0 billion and thereby reduced the
accumulated budget deficit.
With strengthening revenues and reduced caseload growth driven by an
improving economy, the State entered the 1995-96 Fiscal Year budget negotiations
with the smallest nominal "budget gap" to be closed in many years. The 1995-96
Budget Act projected General Fund revenues and transfers of $44.1 billion, a
3.5% increase from the prior year, and expenditures were budgeted at $43.4
billion. In addition, the Department of Finance projected that after repaying
the last of the carryover budget deficit, there would be a positive balance of
$28 million in the budget reserve as of June 30, 1996.
1996-97 Fiscal Year. The 1996-97 Governor's Budget, released January 10, 1996,
projected General Fund revenues and transfers of $45.6 billion, a 1.3% increase
over 1995-96. The Governor's budget proposed two major initiatives, a 15%
personal and corporate income tax cuts and a revision of the trial court funding
program, which would have the effect of reducing General Fund revenues. The
Governor's Budget proposed General Fund expenditures of $45.2 billion. The
Governor's Budget also proposed Special Fund revenues equal to expenditures, at
a level of $13.3 billion.
The May Revision of the Governor's Budget, released on May 21, 1996 ("The
May Revision"), updated revenue estimates for the 1996-97 Fiscal Year,
reflecting stronger economic activity in the State and thus greater revenue
growth. The revised estimate was for $47.1 billion of revenues, still assuming
the Governor's tax cut would be enacted, and $46.5 billion of expenditures.
1996-97 Budget Act. The 1996-97 Budget Act was signed by the Governor on July
15, 1996, along with various implementing bills. The Governor vetoed about $82
million of appropriations (both General Fund and Special Fund). With the signing
of the Budget Act, the State implemented its regular cash flow borrowing program
with the issuance of $3.0 billion of Revenue Anticipation Notes to mature on
June 30, 1997. The Budget Act appropriates a budget reserve in the Special Fund
of $305 million, as of June 30, 1997. The Department of Finance projects that,
on June 30, 1997, the State's available borrowable (cash) resources will be $2.9
billion, after payment of all obligations due by that date, so that no
cross-fiscal year borrowing is anticipated.
Revenues -- The Legislature rejected the Governor's proposed 15% cut in
personal income taxes (to be phased in over three years), approved a 5% cut in
bank and corporation taxes, to be effective for income years commencing on
January 1, 1997. As a result of the Legislature's failure to enact the personal
income tax cut, revenues for the Fiscal Year are estimated to be $550 million
higher than projected in the May Revision, and are now estimated to total
$47.643 billion, a 3.3% increase over the final estimated 1995-96 revenues.
Special Fund revenues are estimated to be $13.3 billion.
Expenditures -- The Budget Act contains General Fund appropriations totaling
$47.251 billion, a 4.0% increase over the final estimated 1995-96 expenditures.
Special Fund expenditures are budgeted at $12.6 billion.
The following are principal features of the 1996-97 Budget Act:
1. Proposition 98 funding for schools and community college districts
increased by almost $1.6 billion (General Fund) and $1.65 billion above
revised 1995-96 levels. Almost half of this money was budgeted to fund
class-size reductions in kindergarten and grades 1-3. Also, for the second
consecutive year, the full cost of living allowance (3.2 percent) was
funded. Proposition 98 increases have brought K-12 expenditures to almost
$4,800 per pupil (also called ADA, or Average Daily Attendance), an almost
15% increase over the level prevailing during the recession years. Out of
this $1.6 billion total community colleges will receive an increase in
funding of $157 million for 1996-97.
Due to higher than projected revenues in 1995-96, an additional $1.1
billion ($190 per K-12 ADA and $145 million for community colleges) was
appropriated and retroactively applied towards the 1995-96 Proposition 98
guarantee, bringing K-12 expenditures in that year to over $4,600 per ADA.
Similar retroactive increases totaling $230 million, based on final figures
on revenues and State population growth, were made to the 1991-92 and the
1994-95 Proposition 98 guarantees, most of which was allocated to each
school site.
2. The Budget Act assumed savings of approximately $660 million in
health and welfare costs which required changes in federal law, including
federal welfare reform. The Budget Act further assumed federal law changes
in August 1996 which would allow welfare cash grant levels to be reduced by
October 1, 1996. These cuts totaled approximately $163 million of the
anticipated $660 million savings. See "Federal Welfare Reform".
3. A 4.9% increase in funding for the University of California ($130
million General Fund) and the California State University system ($101
million General Fund), with no increases in student fees.
4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health care
costs of illegal immigrants. These funds reduce appropriations in these
categories that would otherwise have to be paid from the General Fund. (For
purposes of cash flow projections, the Department of Finance expects $540
million of this amount to be received during the 1996-97 fiscal year.)
5. General Fund support for the Department of Corrections was increased
by about 7% over the prior year, reflecting estimates of increased prison
population.
6. With respect to aid to local governments, the principal new programs
included in the Budget Act are $100 million in grants to cities and counties
for law enforcement purposes, and budgeted $50 million for competitive
grants to local governments for programs to combat juvenile crime.
The Budget Act did not contain any tax increases. As noted, there was a
reduction in bank and corporate taxes. In addition, the Legislature approved
another one-year suspension of the Renters Tax Credit, saving $520 million in
expenditures.
Federal Welfare Reform -- Following enactment of the 1996-97 Budget Act,
Congress passed and the President signed (on August 22, 1996) the Personal
Responsibility and Work Opportunity Act of 1996 (P.L. 104-193, the "Law") making
a fundamental reform of the current welfare system. Among many provisions, the
Law includes: (i) conversion of Aid to Families with Dependent Children from an
entitlement program to a block grant titled Temporary Assistance for Needy
Families (TANF), with lifetime time limits on TANF recipients, work requirements
and other changes; (ii) provisions denying certain federal welfare and public
benefits to legal noncitizens, allowing states to elect to deny additional
benefits (including TANF) to legal noncitizens, and generally denying almost all
benefits to illegal immigrants; and (iii) changes in the Food Stamp program,
including reducing maximum benefits and imposing work requirements.
The Law requires states to implement the new TANF program not later than
July 1, 1997 and provides California approximately $3.7 billion in block grant
funds for FY 1996-97. States are allowed to implement TANF as soon as possible
and will receive a prorated block grant effective the date of application. The
California State Plan is to be submitted in time to allow grant reductions to be
implemented effective January 1, 1997 (allowing $92 million of the $163 million
referred to in paragraph 2 above to be saved) and to allow the State to capture
approximately $267 million in additional federal block grant funds over the
currently budgeted level. None of the other federal changes needed to achieve
the balance of the $660 million cost savings were enacted. Thus in lieu of the
$660 million savings initially assumed to be saved, it is now projected that
savings will total approximately $360 million.
A preliminary analysis of the Law by the Legislative Analyst's Office
indicated that an overall assessment of how these changes will affect the
State's General Fund will not be known for some time, and will depend on how the
State implements the Law. There are many choices including how quickly the State
implements the Law; the degree to which the State elects to make up for cuts in
federal aid; provide more aid to counties, or cut some of its own existing
programs for noncitizens; and the State's ability to avoid certain penalties
written into the Law.
1997-98 Fiscal Year Proposed Budget. On January 9, 1997, the Governor released
his proposed budget for the 1997-98 Fiscal Year (the "Governor's Budget"). The
Governor's Budget projects General Fund revenues and transfers in 1997-98 of
$50.7 billion, a 4.6% increase from revised 1996-97 figures. The Governor
proposes expenditures of $50.3 billion, a 3.9% increase from 1996-97. The
Governor's Budget projects a balance in the SFEU of $553 million on June 30,
1998. The Governor's Budget also anticipates about $3 billion of external
borrowing for cash flow purposes during the year, with no requirement for
cross-fiscal year borrowing.
Among the major initiatives and features of the Governor's Budget are the
following:
1. A proposed 10% cut in the Bank and Corporation Tax rate, to be
phased in over two years.
2. Proposition 98 funding for K-14 schools will be increased again, as a
result of stronger revenues. Per-pupil funding for K-12 schools will reach
$5,010, compared to $4,220 as recently as the 1993-94 Fiscal Year. Part of
the new funding is proposed to be dedicated to the completion of the current
program to reduce class size to 20 pupils in lower elementary grades, and to
expand the program by one grade, so that it will cover K-3rd grade.
3. Funding for higher education will be increased consistent with a
four-year "compact" established in 1995-96. There is not projected to be any
increase in student fees at any of the three levels of the State higher
education system.
4. The 1997-98 proposed Governor's Budget assumes approximately $500
million in savings contingent upon federal action. The Budget assumes that
federal law will be enacted to remove the maintenance-of-effect requirement
for Supplemental Security Income (SSI) payments, thereby enabling the state
to reduce grant levels pursuant to previously enacted state law ($279
million). The Budget also assumes the federal government will fund $216
million in costs of health care for illegal immigrants.
The Orange County Bankruptcy. On December 6, 1994, Orange County, California
and its Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the
United States Bankruptcy Code. The subsequent restructuring led to the sale of
substantially all of the Pool's portfolio and resulted in losses estimated to be
approximately $1.7 billion (or approximately 22% of amounts deposited by the
Pool investors). Approximately 187 California public entities -- substantially
all of which are public agencies within the county -- had various bonds, notes
or other forms of indebtedness outstanding. In some instances the proceeds of
such indebtedness were invested in the Pool.
In April, 1996, the County emerged from bankruptcy after closing on a $900
million recovery bond deal. At that time, the County and its financial advisors
stated that the County had emerged from the bankruptcy without any structural
fiscal problems and assured that the County would not slip back into bankruptcy.
However, for many of the cities, schools and special districts that lost money
in the County portfolio, repayment remains contingent on the outcome of
litigation which is pending against investment firms and other finance
professionals. Thus, it is impossible to determine the ultimate impact of the
bankruptcy and its aftermath on these various agencies and their claims.
Constitutional, Legislative and Other Factors
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
the adverse effects described below, among others.
Revenue Distribution. Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on California State
revenues for payment of these obligations. Property tax revenues and a portion
of the State's general fund surplus are distributed to counties, cities and
their various taxing entities and the State assumes certain obligations
theretofore paid out of local funds. Whether and to what extent a portion of the
State's general fund will be distributed in the future to counties, cities and
their various entities is unclear.
Health Care Legislation. Certain Debt Obligations in the Portfolio may be
obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect these
revenues and, consequently, payment on those Debt Obligations.
The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only those
hospitals which enter into a Medi-Cal contract with the State of California will
be paid for non-emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice under
certain circumstances and is obligated to make contractual payments only to the
extent the California legislature appropriates adequate funding therefor.
California enacted legislation in 1982 that authorizes private health plans
and insurers to contract directly with hospitals for services to beneficiaries
on negotiated terms. Some insurers have introduced plans known as "preferred
provider organizations" ("PPOs"), which offer financial incentives for
subscribers who use only the hospitals which contract with the plan. Under an
exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for "multi-level"
facilities at a reserve level consistent with those that would be required by an
insurance company.
Mortgages and Deeds. Certain Debt Obligations in the Portfolio may be
obligations which are secured in whole or in part by a mortgage or deed of trust
on real property. California has five principal statutory provisions which limit
the remedies of a creditor secured by a mortgage or deed of trust. Two statutes
limit the creditor's right to obtain a deficiency judgment, one limitation being
based on the method of foreclosure and the other on the type of debt secured.
Under the former, a deficiency judgment is barred when the foreclosure is
accomplished by means of a nonjudicial trustee's sale. Under the latter, a
deficiency judgment is barred when the foreclosed mortgage or deed of trust
secures certain purchase money obligations. Another California statute, commonly
known as the "one form of action" rule, requires creditors secured by real
property to exhaust their real property security by foreclosure before bringing
a personal action against the debtor. The fourth statutory provision limits any
deficiency judgment obtained by a creditor secured by real property following a
judicial sale of such property to the excess of the outstanding debt over the
fair value of the property at the time of the sale, thus preventing the creditor
from obtaining a large deficiency judgment against the debtor as the result of
low bids at a judicial sale. The fifth statutory provision gives the debtor the
right to redeem the real property from any judicial foreclosure sale as to which
a deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power of
sale contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days after
expiration of the three-month reinstatement period. The debtor may reinstate the
mortgage, in the manner described above, up to five business days prior to the
scheduled sale date. Therefore, the effective minimum period for foreclosing on
a mortgage could be in excess of seven months after the initial default. Such
time delays in collections could disrupt the flow of revenues available to an
issuer for the payment of debt service on the outstanding obligations if such
defaults occur with respect to a substantial number of mortgages or deeds of
trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such private
sale to constitute "state action," and could hold that the private-
right-of-sale proceedings violate the due process requirements of the Federal or
State Constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain Debt Obligations in the Portfolio may be obligations which finance
the acquisition of single family home mortgages for low and moderate income
mortgagors. These obligations may be payable solely from revenues derived from
the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage loans
may be imposed only with respect to voluntary prepayments made during the first
five years during the term of the mortgage loan, and then only if the borrower
prepays an amount in excess of 20% of the original principal amount of the
mortgage loan in a 12-month period; a prepayment charge cannot in any event
exceed six months' advance interest on the amount prepaid during the 12-month
period in excess of 20% of the original principal amount of the loan. This
limitation could affect the flow of revenues available to an issuer for debt
service on the outstanding debt obligations which financed such home mortgages.
Proposition 13. Certain of the Debt Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem tax on
real property to 1% of full cash value to be collected by the counties and
apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under "full cash
value" or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
Legislation enacted by the California Legislature to implement Article XIIIA
provides that notwithstanding any other law, local agencies may not levy any ad
valorem property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum tax
permitted by Article XIIIA.
Proposition 9. On November 6, 1979, an initiative known as "Proposition 9"
or the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIIIB does not affect
the appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general terms, the "appropriations
limit" is required to be based on certain 1978/79 expenditures, and is to be
adjusted annually to reflect changes in consumer prices, population, and certain
services provided by these entities. Article XIIIB also provides that if these
entities' revenues in any year exceed the amounts permitted to be spent, the
excess is to be returned by revising tax rates or fee schedules over the
subsequent two years.
Proposition 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools
are guaranteed the greater of (a) in general, a fixed percent of General Fund
revenues ("Test 1"), (b) the amount appropriated to K-14 schools in the prior
year, adjusted for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment ("Test 2"), or
(c) a third test, which would replace Test 2 in any year when the percentage
growth in per capita General Fund revenues from the prior year plus one half of
one percent is less than the percentage growth in State per capita personal
income ("Test 3"). Under Test 3, schools would receive the amount appropriated
in the prior year adjusted for changes in enrollment and per capita General Fund
revenues, plus an additional small adjustment factor. If Test 3 is used in any
year, the difference between Test 3 and Test 2 would become a "credit" to
schools which would be the basis of payments in future years when per capita
General Fund revenue growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature -- by two-thirds vote of both houses,
with the Governor's concurrence -- to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. In 1992, a lawsuit was filed, California Teachers'
Association v. Gould, which challenged the validity of these off-budget loans.
During the course of this litigation, a trial court determined that almost $2
billion in "loans" which had been provided to school districts during the
recession violated the constitutional protection of support for public
education. A settlement was reached on April 12, 1996 which ensures that future
school funding will not be in jeopardy over repayment of these so-called loans.
Proposition 111. On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July 1,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the State and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
Proposition 62. On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative provided the
following:
1. Requires that any tax for general governmental purposes imposed by local
governments be approved by resolution or ordinance adopted by a two-thirds vote
of the governmental entity's legislative body and by a majority vote of the
electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other than
general governmental purposes) imposed by a local governmental entity be
approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes or for
the service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA;
5. Prohibits the imposition of transaction taxes and sales taxes on the
sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after August
1, 1985 be ratified by a majority vote of the electorate within two years of
the adoption of the initiative;
7. Requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of property tax revenue
allocated to such local government occurs in an amount equal to the revenues
received by such entity attributable to the tax levied in violation of the
initiative; and
8. Permits these provisions to be amended exclusively by the voters of the
State of California.
In September 1988, the California Court of Appeal in City of Westminster v.
County of Orange, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511 (Cal.Ct.App. 1988),
held that Proposition 62 is unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and prior
to the effective date of Proposition 62, to be subject to approval by a majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is impossible to predict the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62. The California Court of
Appeal in City of Woodlake v. Logan, (1991) 230 Cal.App.3d 1058, subsequently
held that Proposition 62's popular vote requirements for future local taxes also
provided for an unconstitutional referenda. The California Supreme Court
declined to review both the City of Westminster and the City of Woodlake
decisions.
In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28, 1995)
11 Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e, the
California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes, and specifically disapproved of the
City of Woodlake decision as erroneous. The Court did not determine the
correctness of the City of Westminster decision, because that case appeared
distinguishable, was not relied on by the parties in Guardino, and involved
taxes not likely to still be at issue. It is impossible to predict the impact of
the Supreme Court's decision on charter cities or on taxes imposed in reliance
on the City of Woodlake case.
Senate Bill 1590 (O'Connell), introduced February 16, 1996, would make the
Guardino decision inapplicable to any tax first imposed or increased by an
ordinance or resolution adopted before December 14, 1995. The California State
Senate passed the Bill on May 16, 1996 and it is currently pending in the
California State Assembly. It is not clear whether the Bill, if enacted, would
be constitutional as a non-voted amendment to Proposition 62 or as a non-voted
change to Proposition 62's operative date.
Proposition 218. On November 5, 1996, the voters of the State approved
Proposition 218, a constitutional initiative, entitled the "Right to Vote on
Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and XIII D
to the California Constitution and contains a number of interrelated provisions
affecting the ability of local governments to levy and collect both existing and
future taxes, assessments, fees and charges. Proposition 218 became effective on
November 6, 1996. The Sponsors are unable to predict whether and to what extent
Proposition 218 may be held to be constitutional or how its terms will be
interpreted and applied by the courts. However, if upheld, Proposition 218 could
substantially restrict certain local governments' ability to raise future
revenues and could subject certain existing sources of revenue to reduction or
repeal, and increase local government costs to hold elections, calculate fees
and assessments, notify the public and defend local government fees and
assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for the
imposition, extension or increase of general taxes and two-thirds voter approval
for the imposition, extension or increase of special taxes, including special
taxes deposited into a local government's general fund. Proposition 218 also
provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the initiative
power to give voters the power to reduce or repeal local taxes, assessments,
fees and charges, regardless of the date such taxes, assessments, fees or
charges were imposed. This extension of the initiative power to some extent
constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v.
Brown, which upheld an initiative that repealed a local tax and held that the
State constitution does not preclude the repeal, including the prospective
repeal, of a tax ordinance by an initiative, as contrasted with the State
constitutional prohibition on referendum powers regarding statutes and
ordinances which impose a tax. Generally, the initiative process enables
California voters to enact legislation upon obtaining requisite voter approval
at a general election. Proposition 218 extends the authority stated in Rossi v.
Brown by expanding the initiative power to include reducing or repealing
assessments, fees and charges, which had previously been considered
administrative rather than legislative matters and therefore beyond the
initiative power.
The initiative power granted under Article XIII C of Proposition 218, by its
terms, applies to all local taxes, assessments, fees and charges and is not
limited to local taxes, assessments, fees and charges that are property related.
Article XIII D of Proposition 218 adds several new requirements making it
generally more difficult for local agencies to levy and maintain "assessments"
for municipal services and programs. "Assessment" is defined to mean any levy or
charge upon real property for a special benefit conferred upon the real
property.
Article XIII D of Proposition 218 also adds several provisions affecting
"fees" and "charges" which are defined as "any levy other than an ad valorem
tax, a special tax, or an assessment, imposed by a local government upon a
parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available to the public at large in substantially the same manner as
it is to property owners. Further, before any property related fee or charge may
be imposed or increased, written notice must be given to the record owner of
each parcel of land affected by such fee or charges. The local government must
then hold a hearing upon the proposed imposition or increase of such property
based fee, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the local government may not
impose or increase the fee or charge. Moreover, except for fees or charges for
sewer, water and refuse collection services, no property related fee or charge
may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds
voter approval by the electorate residing in the affected area.
Proposition 87. On November 8, 1988, California voters approved Proposition
87. Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit redevelopment
agencies from receiving any of the property tax revenue raised by increased
property tax rates levied to repay bonded indebtedness of local governments
which is approved by voters on or after January 1, 1989.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $43,194,441. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $239,320, $327,056 and $418,800, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$13,043, $18,443 and $34,529, respectively, of the Fund's operating expenses
were allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $2,829, all of which was paid to Authorized
Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
year ended March 31, 1997 was $1,411, of which $6 was received by the Principal
Underwriter and $1,405 was received by Authorized Firms. The total sales charges
for sales of shares of the Fund during the fiscal year ended March 31, 1996 was
$19, which amount was paid to Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $142.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $26,519 and $5,129, respectively, on portfolio security
transactions aggregating $208,919,974 and $45,929,728, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms have been selected in any particular transaction primarily because of
their execution capabilities). For the fiscal year ended March 31, 1995, the
Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1): COMPENSATION COMPENSATION TOTAL COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $0 $ 941(2) $145,000(5)
Samuel L. Hayes, III .................... 0 1,132(3) 155,000(6)
Norton H. Reamer ........................ 0 1,074 145,000
John L. Thorndike ....................... 0 1,162(4) 148,750(7)
Jack L. Treynor ......................... 0 1,116 150,000
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $414 of deferred compensation.
(3) Includes $146 of deferred compensation.
(4) Includes $457 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I. Cynthia J. Clemson (34) is a Vice
President of the Portfolio. Ms. Clemson has served as a Vice President of the
Portfolio since June 23, 1997. Ms. Clemson has been a Vice President of BMR
and Eaton Vance since 1993 and an employee of Eaton Vance since 1985. Ms.
Clemson is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from May 29, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on December 8, 1993
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge. Total return for this time period has
not been adjusted to reflect the Fund's distribution fees and/or service fees
and certain other expenses. If such adjustments were made, the performance would
have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF VALUE OF INVEST- ---------------------------- ---------------------------
PERIOD** DATE INVESTMENT* MENT ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ------------ ----------- ---------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 05/29/92 $977.44 $1,219.44 24.76% 4.68% 21.94% 4.18%
1 Year Ended
03/31/97 03/31/96 $977.71 $1,012.67 3.58% 3.58% 1.27% 1.27%
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.
- ------------
* Initial investment less the maximum sales charge of 2.25%.
** 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, 1997, the yield of the Fund was
4.16%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.16% would be 6.70%, assuming a
combined federal and State tax rate of 37.90%. If a portion of the Fund's
expenses had not been allocated to the Administrator, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
Individual shareholders of the Fund who reside in California will not be
subject to California personal income tax on distributions received from the
Fund to the extent such distributions are attributable to interest on
obligations the interest on which is exempt under either federal or California
law from taxation by the State of California, provided that at least 50% of the
Portfolio's assets at the close of each quarter of its taxable year is invested
in such obligations. Distributions from the Fund which are attributable to
sources other than those in the preceding sentence will generally be taxable to
such individual shareholders as ordinary income. Distributions of the Fund's net
capital gains (the excess of net long-term capital gain over net short-term
capital loss) are taxable to shareholders as long-term capital gains which are
taxable at ordinary income rates for California personal income tax purposes. In
addition, distributions other than exempt-interest dividends are includable in
income subject to the California alternative minimum tax. Shares of the Fund
will not be subject to the California property tax.
Distributions of investment income and long-term and short-term capital
gains from the Fund will not be excluded from taxable income in determining
California corporate franchise tax for corporate shareholders. However,
distributions of the Fund's net capital gains are treated as long-term capital
gains for California corporate tax purposes. In addition, distributions may be
includable in income subject to the alternative minimum tax.
California tax law resembles federal tax law in restricting the
deductibility of interest on indebtedness incurred by shareholders to purchase
shares and the allowance of losses realized by a shareholder upon the sale or
redemption of shares.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 45.84% 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 has voting power under certain limited circumstances.
In addition, as of June 30, 1997, the following shareholders owned beneficially
and of record the percentage of outstanding shares of the Fund indicated after
their names: Painewebber, for the Benefit of Alma Cella Yoder TTEE, Alma Cella
Yoder Living Trust, c/o TIS-Patricia Howe, San Francisco, CA 94111-2635 (8.66%);
and Everen Clearing Corp., a/c 5667-5751, Michael Moye, Milwaukee, WI 53202
(7.65%). To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic California Limited Maturity Tax
Free Fund to EV Classic California Limited Maturity Municipals Fund on December
15, 1995 and to EV Traditional California Limited Maturity Municipals Fund on
February 1, 1996.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the 1997 regular federal income tax
rates and California State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND CALIFORNIA STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CA STATE --------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.10% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 34.70 6.13 6.89 7.66 8.42 9.19 9.95 10.72
$ 59,751 - $124,650 $ 99,601 - $151,750 37.42 6.39 7.19 7.99 8.79 9.59 10.39 11.19
$124,651 - $271,050 $151,751 - $271,050 41.95 6.89 7.75 8.61 9.47 10.34 11.20 12.06
Over $271,050 Over $271,050 45.22 7.30 8.21 9.13 10.04 10.95 11.87 12.78
* Net amount subject to federal and California personal income tax after deductions and exemptions.
+ The combined tax brackets are calculated using the highest California State rate within the bracket. Taxpayers with taxable
income within each bracket may have a lower combined tax bracket and taxable equivalent yield indicated above. The combined
tax brackets assume that California taxes are itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher combined tax bracket and taxable equivalent yield
than those indicated above. The applicable federal tax rates within the brackets set forth above are 15%, 28%, 31%, 36% and
39.6% over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including California State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and California personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for California personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the AMT. The
illustrations assume that the AMT is not applicable and do not take into account
any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL CONNECTICUT LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Connecticut considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in Connecticut issuers. Such information supplements the information in the
Prospectus and 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
Connecticut issuers. Neither the Trust nor the Portfolio has independently
verified this information.
Connecticut's manufacturing industry, which has historically been of prime
economic importance to the State, its municipalities and its residents, has been
in decline for several years. Although Connecticut's manufacturing industry is
diversified between transportation equipment (primarily aircraft engines,
helicopters and submarines), non-electrical machinery, fabricated metal products
and electrical machinery, defense-related business represents a relatively high
proportion of manufacturing receipts. As a result, reductions in defense
spending have had a substantial adverse effect on Connecticut's manufacturing
industry.
Connecticut's manufacturing employment peaked in 1970 at over 441,000
workers but had declined 36.5% by 1995. Although the loss of manufacturing jobs
was partially offset by a 69.7% rise in other non-agricultural employment during
the same period, Connecticut's growth in non-manufacturing employment has lagged
behind the New England region and the nation as a whole. Moreover, Connecticut's
largest defense contractors have announced plans to reduce their labor forces
substantially over the next few years.
From 1986 through 1996, Connecticut's unemployment rate was generally lower
than the unemployment rate for the U.S. as a whole, and average per capita
personal income of Connecticut residents was higher than that of residents of
other states. The average unemployment rate (seasonally adjusted) in Connecticut
increased from a low of 3.0% in 1988 to 7.5% in 1992 and, after a number of
important changes in the method of calculation, was reported to be 5.0% in 1996.
Average per capita personal income of Connecticut residents increased in every
year from 1985 to 1995, rising from $18,268 to $31,776. However, pockets of
significant unemployment and poverty exist in some Connecticut cities and towns,
and Connecticut is now in a recession, the depth and duration of which are
uncertain.
For the four fiscal years ended June 30, 1991, the General Fund ran
operating deficits of approximately $115,600,000, $28,000,000, $259,000,000 and
$808,500,000, respectively. At the end of the 1990-1991 fiscal year, the General
Fund had an accumulated unappropriated deficit of $965,712,000. For the five
fiscal years ended June 30, 1996, the General Fund ran operating surpluses of
approximately $110,200,000, $113,500,000, $19,700,000, $80,500,000, and
$250,000,000, respectively. General Fund budgets for the biennium ending June
30, 1997, were adopted in 1995 and amended in 1996. General Fund expenditures
and revenues are budgeted to be approximately $9,200,000,000 for the 1996-1997
fiscal year.
In 1991, to address the General Fund's growing deficit, legislation was
enacted by which the State imposed an the income tax on individuals, trusts and
estates for taxable years generally commencing in 1992. For each fiscal year
starting with the 1991-1992 fiscal year, the General Fund has operated at a
surplus with over 60% of the State's tax revenues being generated by the income
tax and the sales and use tax. However, the State's budgeted expenditures have
almost doubled from approximately $4,300,000,000 for the 1986-1987 fiscal year
to approximately $9,200,000,000 for the 1996-1997 fiscal year.
The 1991 legislation also authorized the State Treasurer to issue Economic
Recovery Notes to fund the General Fund's accumulated deficit of $965,712,000 as
of June 30, 1991, and during 1991 the State issued a total of $965,710,000
Economic Recovery Notes, of which $196,555,000 were outstanding as of May 1,
1997. The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium ending June 30, 1997, payment of the
remaining notes scheduled to be paid during the 1995-96 fiscal year was
rescheduled to be paid over the four fiscal years ending June 30, 1999.
The State's primary method for financing capital projects is through the
sale of general obligation bonds. As of May 1, 1997, the State had authorized
general obligation bonds totaling $10,813,448,000, of which $9,673,240,000 had
been approved for issuance by the State Bond Commission, $8,797,072,000 had been
issued, and $6,384,716,267 were outstanding.
In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The improvements are to be financed by $18 million of general
obligation bonds of the State and $962 million bonds of the University. The
University's bonds will be secured by a State debt service commitment, the
aggregate amount of which is limited to $382 million for the four fiscal years
ending June 30, 1999, and $580 million for the six fiscal years ending June 30,
2005.
In addition to the bonds described above, the State also has limited or
contingent liability on a significant amount of other bonds. Such bonds have
been issued by the following quasi-public agencies: the Connecticut Housing
Finance Authority, the Connecticut Development Authority, the Connecticut Higher
Education Supplemental Loan Authority, the Connecticut Resources Recovery
Authority and the Connecticut Health and Educational Facilities Authority. Such
bonds have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of October 15, 1996, the amount of
bonds outstanding on which the State has limited or contingent liability totaled
$3,985,400,000.
In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2000, is currently estimated to be
$11.2 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $4.7 billion share of such cost by issuing $4.2 billion
of special tax obligation ("STO") bonds. The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license, permit and fee
revenues pledged therefor and credited to the Special Transportation Fund, which
was established to budget and account for such revenues.
As of October 15, 1996, the General Assembly had authorized $4,157,900,000
of such STO bonds, of which $3,594,700,000 new money borrowings had been issued.
It is anticipated that additional STO bonds will be authorized annually in
amounts necessary to finance and to complete the infrastructure program. Such
additional bonds may have equal rank with the outstanding bonds provided certain
pledged revenue coverage requirements are met. The State expects to continue to
offer bonds for this program.
On March 29, 1990, Standard and Poors reduced its ratings of the State's
general obligation bonds from AA+ to AA, and on April 9, 1990, Moody's reduced
its ratings from Aa1 to Aa. On September 13, 1991, Standard & Poors further
reduced its ratings of the State's general obligation bonds and certain
obligations that depend in part on the creditworthiness of the State to AA-. On
March 17, 1995, Fitch reduced its ratings of the State's general obligation
bonds from AA+ to AA.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of the
following cases might have a significant impact on the State's financial
position: (i) a class action by the Connecticut Criminal Defense Lawyers
Association claiming a campaign of illegal surveillance activity and seeking
damages and injunctive relief; (ii) an action on behalf of all persons with
traumatic brain injury, claiming that their constitutional rights are violated
by placement in State hospitals alleged not to provide adequate treatment and
training, and seeking placement in community residential settings with
appropriate support services; and (iii) litigation involving claims by Indian
tribes to a portion of the State's land area.
As a result of litigation on behalf of black and Hispanic school children in
the City of Hartford seeking "integrated education" within the Greater Hartford
metropolitan area, on July 9, 1996, the State Supreme Court directed the
legislature to develop appropriate measures to remedy the racial and ethnic
segregation in the Hartford public schools. The fiscal impact of this decision
might be significant but is not determinable at this time.
General obligation bonds issued by municipalities are payable primarily from
ad valorem taxes on property located in the municipality. A municipality's
property tax base is subject to many factors outside the control of the
municipality, including the decline in Connecticut's manufacturing industry. In
addition to general obligation bonds backed by the full faith and credit of the
municipality, certain municipal authorities finance projects by issuing bonds
that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.
In recent years, certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits. The
most notable of these is the City of Bridgeport, which filed a bankruptcy
petition on June 7, 1991. The State opposed the petition. The United States
Bankruptcy Court for the District of Connecticut held that Bridgeport has
authority to file such a petition but that its petition should be dismissed on
the grounds that Bridgeport was not insolvent when the petition was filed.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $12,273,967. For the
fiscal years ended March 31, 1997, 1996 and 1995, absent a fee reduction, the
Portfolio would have paid BMR advisory fees of $64,492, $74,308 and $80,031,
respectively (equivalent to 0.47%, 0.46% and 0.45%, respectively, of the
Portfolio's average daily net assets for each such year). To enhance the net
income of the Portfolio for the fiscal years ended March 31, 1997 and 1996, BMR
made a reduction of its advisory fee in the amount of $32,497 and $53,054,
respectively. To enhance the net income of the Portfolio for the fiscal year
ended March 31, 1995, BMR made a reduction of 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 $8,932. The Portfolio's Investment Advisory
Agreement with BMR is dated April 9, 1993 and may be continued as described
under "Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$12,442, $12,441 and $24,567, respectively, of the Fund's operating expenses
were allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $659, of which $651 was paid to Authorized
Firms and the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended March 31, 1997 and 1996 were $2,627 and $5,710, respectively, which
amounts were paid to Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $2.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $11,480 and $1,257, respectively, on portfolio security
transactions aggregating $86,456,944 and $11,264,026, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1): COMPENSATION COMPENSATION TOTAL COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $0 $35(2) $145,000(5)
Samuel L. Hayes, III .................... 0 31(3) 155,000(6)
Norton H. Reamer ........................ 0 31 145,000
John L. Thorndike ....................... 0 32(4) 148,750(7)
Jack L. Treynor ......................... 0 35 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $15 of deferred compensation.
(3) Includes $5 of deferred compensation.
(4) Includes $16 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from April 16, 1993 through
March 31, 1997 and for the one-year period ended March 31, 1997. The total
return for the period prior to the Fund's commencement of operations on December
27, 1993 reflects the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge. Total return for this time
period has not been adjusted to reflect the Fund's distribution fees and/or
service fees and certain other expenses. If such adjustments were made, the
performance would have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF VALUE OF INVEST- ------------------------------- -------------------------------
PERIOD** DATE INVESTMENT* MENT ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------ ----------- ------------ ----------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 4/16/93 $977.43 $1,112.03 13.78% 3.31% 11.20% 2.72%
1 Year Ended
3/31/97 3/31/96 $977.62 $1,012.21 3.54% 3.54% 1.22% 1.22%
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.
- ----------
*Initial investment less the maximum sales charge of 2.25%.
**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, 1997, the yield of the Fund was
4.33%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.33% would be 6.57%, assuming a
combined federal and State tax rate of 34.11%. 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.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246, was the record owner of approximately 26.72% 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 has 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
names: Prudential Securities FBO Mrs. Kristen K. Joseph, Brooklyn, CT 06234-1400
(32.84%); and PaineWebber for the Benefit of Chester Hardisty & Gertrude
Hardisty JTWROS, Woodbury, CT 06798-2615 (10.68%). To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic Connecticut Limited Maturity Tax
Free Fund to EV Classic Connecticut Limited Maturity Municipals Fund on December
15, 1995 and to EV Traditional Connecticut Limited Maturity Municipals Fund on
February 1, 1996.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and
Connecticut State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND CONNECTICUT STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------- ---------------------- CT STATE ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 18.25% 4.89% 5.50% 6.12% 6.73% 7.34% 7.95% 8.56%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 31.24 5.82 6.54 7.27 8.00 8.73 9.45 10.18
$ 59,751 - $124,650 $ 99,601 - $151,750 34.11 6.07 6.83 7.59 8.35 9.11 9.86 10.62
$124,651 - $271,050 $151,751 - $271,050 38.88 6.54 7.36 8.18 9.00 9.82 10.63 11.45
Over $271,050 Over $271,050 42.32 6.93 7.80 8.67 9.54 10.40 11.27 12.14
* Net amount subject to federal and Connecticut personal income tax after deductions and exemptions.
+ The combined federal and Connecticut tax brackets are calculated using the highest Connecticut tax rate within each bracket,
reduced by available tax credits. Taxpayers with taxable income within these brackets may have a lower combined tax bracket
and taxable equivalent yield than indicated above. Tax credits reduce the effective Connecticut tax rate for single filers
with taxable income up to $52,500 and joint filers up to $100,500. The combined tax brackets assume that Connecticut taxes are
itemized deductions for federal income tax purposes. Investors who do not itemize deductions on their federal income tax
return will have a higher combined bracket and higher taxable equivalent yield than those indicated above. The applicable
federal tax rates with the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Connecticut State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax and Connecticut personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Connecticut personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the AMT. The
illustrations assume that the AMT is not applicable and do not take into account
any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL FLORIDA LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Florida considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Florida issuers. Such information supplements the information in the Prospectus
and 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 Florida issuers. Neither
the Trust nor the Portfolio has independently verified this information.
Florida is a state characterized by rapid population growth and substantial
capital needs which are being funded through frequent debt issuances and
pay-as-you-go financing. Florida's economy is characterized by a large service
sector, a dependence on the tourism and construction industries, and a large
retirement population. The management of rapid growth has been the major
challenge facing state and local governments. While attracting many senior
citizens, Florida also offers a favorable business environment and growing
employment opportunities that have continued to generate working-age population
immigration. As this growth continues, particularly within the retirement
population, the demand for both public and private services will increase, which
may strain the service sector's capacity and impede the State's budget balancing
efforts.
Florida has a proportionally greater number of persons of retirement age; a
factor that makes Florida's property and transfer payment taxes a relatively
more important source of state funding. Because transfer payments are typically
less sensitive to the business cycle than employment income, they may act as a
stabilizing force in weak economic periods.
Florida tourism appears to be suffering the effects of negative publicity
regarding crime against tourists in the State, product maturity, higher prices
and more aggressive marketing by competing vacation destinations. Tourist
arrivals are expected to increase 2.7% and 3.2%, respectively, in fiscal years
1996-97 and 1997-98, respectively. The total number of visiting tourists is
expected to reach 42.6 million and 43.9 million during fiscal years 1996-97 and
1997-98, respectively.
There has been a decline in Florida's dependency on highly cyclical
construction and construction-related manufacturing sectors. For example, the
total contract construction employment as a share of total non-farm employment
reached a peak of over 10% in 1973. In 1980, the share was roughly 7.5%, and in
1995, the share had edged downward to nearly 5%. This trend is expected to
continue as Florida's economy continues to diversify.
The ability of the State and its local units of government to satisfy its
debt obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the State
in which the issuer of the debt obligations is located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and investment capital.
North and Central Florida are impacted by problems in the agricultural sector,
particularly with regard to the citrus and sugar industries. Short-term adverse
economic conditions may be created in these areas, and in the State as a whole,
due to crop failures, severe weather conditions or other agriculture-related
problems. The State economy also has historically been dependent on the tourism
and construction industries and is, therefore, sensitive to trends in those
sectors.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $92,909,192. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $508,203, $664,262 and $821,095, respectively (equivalent to
0.46%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and for
the period from the start of business, July 5, 1994, to March 31, 1995, $17,937,
$15,507 and $11,493, respectively, of the Fund's operating expenses were
allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $1,385, all of which was paid to Authorized
Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended March 31, 1997, 1996 and for the period from the start of business,
July 5, 1994, to March 31, 1995 were $13,419, $24,020 and $380, respectively, of
which $60, $151 and $5, respectively, was received by the Principal Underwriter
and $13,359, $23,869 and $375, respectively, was received by Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $2.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1995, the Portfolio paid no
brokerage commissions on portfolio transactions. For the fiscal year ended March
31, 1996, the Portfolio paid brokerage commissions of $10,609 on portfolio
security transactions aggregating $95,025,037 to firms which provided some
research services to BMR or its affiliates (although many of such firms may have
been selected in any particular transaction primarily because of their execution
capabilities).
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ................................... $0 $1,557(2) $145,000(5)
Samuel L. Hayes, III ............................... 0 1,808(3) 155,000(6)
Norton H. Reamer ................................... 0 1,687 145,000
John L. Thorndike .................................. 0 1,818(4) 148,750(7)
Jack L. Treynor .................................... 0 1,796 150,000
(1)The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2)Includes $686 of deferred compensation.
(3)Includes $312 of deferred compensation.
(4)Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 23, 1997. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from May 29, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on July 5, 1994
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge. Total return for this time period has
not been adjusted to reflect the Fund's distribution fees and/ or service fees
and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD** DATE INVESTMENT* ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 5/29/92 $977.42 $1,225.07 25.34% 4.78% 22.51% 4.28%
1 Year Ended
3/31/97 3/31/96 $977.80 $1,006.13 2.90% 2.90% 0.61% 0.61%
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.
- ----------
*Initial investment less the current maximum sales charge of 2.25%.
**If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.37%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.37% would be 6.62%, assuming a
combined federal and state tax rate of 33.94%. If a portion of the Fund's
expenses had not been allocated to the Administrator, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 36.80% 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 has voting power under certain limited circumstances.
In addition, as of such date, the following shareholders owned beneficially and
of record the approximate percentages of outstanding shares of the Fund
indicated after their names: NFSC FEBO #ODF-016411, Nancy Casto Benson, Delray
Beach, FL 33483 (14.37%); NFSC FEBO #ODF-172944, Samuel Carson, Boca Raton, FL
33432 (8.42%); NFSC FEBO #ODF-400092, Robert T. Morphy TTEE, Robert T. Morphy
REV TRUST U/A 1/11/90, Boca Raton, FL 33433 (7.97%); US Clearing Corp., FBO
396-10845-18, New York, NY 10004-1798 (6.01%); and US Clearing Corp., FBO
396-10846-17, New York, NY 10004-1798 (5.87%). To the knowledge of the Trust, no
other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Traditional Florida Limited Maturity Tax
Free Fund to EV Traditional Florida Limited Maturity Municipals Fund on December
15, 1995.
TAX EQUIVALENT YIELD TABLE
The tables below give the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and the
Florida intangibles tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
YOU ARE IN
THIS IN YOUR FEDERAL TAX BRACKET, A TAX-FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON FEDERAL ----------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------- -------------------------- ----------- ----------------------------------------------------------
EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,650 Up to $41,200 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751-$124,650 $ 96,601-$151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651-$271,050 $151,751-$271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
<CAPTION>
UNDER FLORIDA INTANGIBLES TAX LAWS, A TAX FREE YIELD OF
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON -----------------------------------------------------------
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------- -------------------------- -----------------------------------------------------------
EQUALS A TAX EQUIVALENT YIELD REFLECTING EXEMPTION FROM
INTANGIBLES TAX:**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,650 Up to $41,200 4.95% 5.54% 6.13% 6.71% 7.30% 7.89% 8.48%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 5.85 6.54 7.23 7.93 8.62 9.31 10.01
$ 59,751-$124,650 $ 99,601-$151,750 6.10 6.83 7.55 8.27 9.00 9.72 10.44
$124,651-$271,050 $151,751-$271,050 6.58 7.36 8.14 8.92 9.70 10.48 11.26
Over $271,050 Over $271,050 6.97 7.80 8.62 9.45 10.28 11.10 11.93
* Net amount subject to federal personal income tax after deductions and exemptions.
** A Florida intangibles tax on personal property of $2.00 per $1,000 is generally imposed after exemptions on the value of
stocks, bonds, other evidences of indebtedness and mutual fund shares. An example of the effect of the Florida intangibles
tax on the tax brackets of Florida taxpayers is as follows. A $10,000 investment subject to the tax would require payment of
$20 annually in intangibles taxes. If the investment yielded 5.5% annually or $550, the intangibles tax as a percentage of
income would be $20/$550 or 3.64%. If a taxpayer were in the 36% federal income tax bracket, assuming the intangibles taxes
were deducted as an itemized deduction on the federal return, the taxpayer would be in a combined federal and Florida state
tax bracket of 38.33% [36% + (1 - .36) X 3.64%] with respect to such investment. A Florida taxpayer whose intangible personal
property is exempt or partially exempt from tax due to the availability of exemptions will have a lower taxable equivalent
yield than indicated above.
</TABLE>
Note: The federal income tax brackets do not take into account the effect of a
reduction in the deductibility of itemized deductions for taxpayers with
adjusted gross income in excess of $121,200. The tax brackets also do not show
the effects of phaseout of personal exemptions for single and joint filers with
adjusted gross incomes in excess of $121,200 and $181,800, respectively. The
effective tax brackets and equivalent taxable yields of such taxpayers will be
higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. The table does not take into account the Florida
intangibles tax, state or local taxes, if any, payable on Fund distributions to
individuals who are not Florida residents, or intangibles taxes, if any, imposed
under the laws of other states. It should also be noted that the interest earned
on certain "private activity bonds" issued after August 7, 1986, while exempt
from the regular federal income tax, is treated as a tax preference item which
could subject the recipient to the AMT. The illustrations assume that the AMT is
not applicable and do not take into account any tax credits that may be
available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL MICHIGAN LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Michigan considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Michigan issuers. Such information supplements the information in the Prospectus
and 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 Michigan issuers.
Neither the Trust nor the Portfolio has independently verified this information.
The State's economy is overly dependent on the manufacturing sector, more
specifically the auto industry. Manufacturing accounts for 23% of total
employment as compared to the national average of 17%. The dependency on
manufacturing makes the State economy overly susceptible to economic downturns.
For January, 1997, the State unemployment rate was 4.9% as compared to the
national average of 5.4%. Modest employment growth is projected for 1997. An
improving economy and successful cost containment have enabled the State to
improve its financial position. For 1995, the Budget Stabilization Fund was
slightly greater than $1.0 billion and is projected to reach $1.1 billion for
1996. The Governor has proposed reducing individual and business income taxes.
Following this reduction, revenues were budgeted to decline 1.2% in 1997.
In March, 1994, Michigan voters approved a change in the tax system. The
most significant provisions were an increase in the sales tax rate from 4% to
6%, a reduction in the income tax rate from 4.6% to 4.4% and the creation of a
statewide property tax. These changes are expected to provide sufficient
revenues to offset the elimination of property taxes for school district
operating purposes. There can be no assurance that school districts will receive
sufficient revenues to be able to service any limited tax bonds they may have
outstanding and which may be held by the Portfolio.
Under the State Constitution, the raising of taxes by the Legislature is
limited if doing so would cause the ratio of Total State Revenues (except
federal aid) to Personal Income of Michigan (as such terms are defined in the
State Constitution) to exceed certain limits. The only exceptions to this
revenue limit are a majority approval of a referendum question or a specific
emergency declared by a two-thirds vote of the Legislature. However, this limit
does not apply to taxes imposed for the payment of principal and interest on
bonds of the State, if the bonds are approved by voters and authorized by a vote
of two-thirds of the members of each House of the Legislature and certain school
district loans. Local units of government and local authorities are authorized
to issue bonds and other evidences of indebtedness in a variety of situations
without the approval of electors, but the ability of the obligor to levy taxes
for the payment of such obligations is subject to the foregoing limitations
unless the obligations were authorized before December 23, 1978 or approved by
the electors. The Constitution prohibits the State from reducing the proportion
of total State spending paid to all local units of government, taken as a group,
below that proportion in effect in the 1978-79 fiscal year. The State may not
mandate new or increased levels of services to be provided by local units
without making appropriations to cover any increased costs.
Under the State Constitution, the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations specified by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the maximum
authorized tax rate would be reduced by a factor which would result in the same
maximum potential tax revenues to the local taxing unit as if the valuation of
taxable property (less new construction and improvements) had grown only at the
Consumer Price Index rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be increased at the Consumer Price Index rate. Conversely, if
taxable property values rise slower than consumer prices, tax rates may be
raised accordingly, but never higher than the rate authorized on December 23,
1978, without elector approval.
The ability of the State to pay the principal and interest on its general
obligation bonds may be affected by the limitations described above. Similarly,
the ability of local units to levy taxes to pay the principal of and interest on
their general obligations is subject to the constitutional, statutory and
charter limits described below.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $14,996,432. For the
fiscal years ended March 31, 1997 and 1996, the Portfolio paid BMR advisory fees
of $83,756 and $126,312, respectively (equivalent to 0.48% and 0.47%,
respectively, of the Portfolio's average daily net assets for each such year).
For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $163,811 (equivalent to 0.46% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of its advisory fee in the amount of
$40,822. The Portfolio's Investment Advisory Agreement with BMR is dated April
9, 1993 and may be continued as described under "Investment Adviser and
Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$14,550, $12,516 and $25,718, respectively, of the Fund's operating expenses
were allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $1,414, all of which was paid to Authorized
Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended March 31, 1997 and 1996 were $1,520 and $22, respectively, which
amounts were paid to Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $102.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $19,514 and $1,986, respectively, on portfolio security
transactions aggregating $140,877,687 and $17,783,836, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $0 $35(2) $145,000(5)
Samuel L. Hayes, III .......................... 0 31(3) 155,000(6)
Norton H. Reamer .............................. 0 31 145,000
John L. Thorndike ............................. 0 32(4) 148,750(7)
Jack L. Treynor 0 35 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $15 of deferred compensation.
(3) Includes $5 of deferred compensation.
(4) Includes $16 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from April 16, 1993 through
March 31, 1997 and for the one-year period ended March 31, 1997. The total
return for the period prior to the Fund's commencement of operations on December
8, 1993 reflect the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge. Total return for this time
period has not been adjusted to reflect the Fund's distribution fees and/or
service fees and certain other expenses. If such adjustments were made, the
performance would have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT -------------------------- --------------------------
PERIOD** DATE INVESTMENT* ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 4/16/93 $977.70 $1,121.23 14.72% 3.53% 12.12% 2.93%
1 Year
Ended
3/31/97 3/31/96 $977.55 $1,024.28 4.78% 4.78% 2.43% 2.43%
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.
- ----------
* Initial investment less the maximum sales charge of 2.25%
** 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, 1997, the yield of the Fund was
4.18%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.18% would be 6.52%, assuming a
combined federal and State tax rate of 35.93%. If a portion of the Fund's
expenses had not been allocated to the Administrator, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 47.18% 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 has 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: Shirley J. McPherson, TTEE, Shirley J. McPherson Trust U/A/D 5/29/85,
Romeo, MI 48065-0423 (7.40%); Painewebber FBO Richard F. Cooper & Mrs. Betty
Jane Cooper, JT TEN, WROS, Northville, MI 48167-1821 (6.28%); C. Mascari &
Associates, Inc., Farmington Hills, MI 48334 (5.68%); and NFSC FEBO #OC8-008710,
Robert E. Byrnes & Waneta A. Byrnes, Ovid, MI 48866 (5.39%). To the knowledge of
the Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic Michigan Limited Maturity Tax Free
Fund to EV Classic Michigan Limited Maturity Municipals Fund on December 15,
1995 and to EV Traditional Michigan Limited Maturity Municipals Fund on February
1, 1996.
TAX EQUIVALENT YIELD TABLES
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax,
Michigan State income tax, Michigan State intangibles tax and Michigan City
income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND MICHIGAN STATE TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------------- MI STATE -------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------------- --------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.33% 5.02% 5.65% 6.28% 6.90% 7.53% 8.16% 8.79%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.52 5.93 6.67 7.41 8.15 8.89 9.63 10.37
$ 59,751 - $124,650 $ 99,601 - $151,750 35.33 6.19 6.96 7.73 8.50 9.28 10.05 10.82
$124,651 - $271,050 $151,751 - $271,050 40.02 6.67 7.50 8.34 9.17 10.00 10.84 11.67
Over $271,050 Over $271,050 43.39 7.07 7.95 8.83 9.72 10.60 11.48 12.37
* Net amount subject to federal and Michigan personal income tax after deductions and exemptions.
+ The combined tax brackets include a Michigan state income tax rate of 4.4%, Michigan City income tax rate of 1% (which may
vary by city), and a Michigan intangibles tax rate of 0.875%, and assume that Michigan State and local taxes are itemized
deductions for federal income tax purposes. Investors who do not itemize deductions on their federal income tax return will
have a higher combined bracket and higher taxable equivalent yield than those indicated above. The applicable federal tax
rates within the brackets are 15%, 28%, 31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Michigan State and local income
taxes) for taxpayers with adjusted gross income in excess of $121,200. The tax
brackets also do not show the effects of phaseout of personal exemptions for
single filers with adjusted gross income in excess of $121,200 and joint filers
with adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Michigan personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for Michigan personal income taxes. It should also be noted
that the interest earned on certain "private activity bonds" issued after August
7, 1986, while exempt from the regular federal income tax, is treated as a tax
preference item which could subject the recipient to the AMT. The illustrations
assume that the AMT is not applicable and do not take into account any tax
credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent
tax law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NEW JERSEY LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain New Jersey considerations is given
to investors in view of the Portfolio's policy of concentrating its investments
in New Jersey issuers. Such information supplements the information in the
Prospectus and 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 New
Jersey issuers. Neither the Trust nor the Portfolio has independently verified
this information.
New Jersey has a well diversified economy and high wealth levels. Per capita
income ranks as the second highest in the nation at 28% above the U.S. average.
The State's economy benefits from its proximity to New York and other major
eastern seaboard cities. New Jersey's economy, like most states, suffered during
the past recession with unemployment increasing and surpassing the national
average. New Jersey's adjusted unemployment rate for April 1997 was 5.2%
compared to 4.9% nationally.
The State ended fiscal 1993 with an $855 million surplus, approximately half
of which was used in the 1994 budget. 1994 had an appropriation for all funds of
$15.7 billion, up 4.8% from fiscal 1993 revised appropriations of $14.7 billion.
Both years benefited from $412 million in nonrecurring revenues from retroactive
Federal Medicaid payments. After the Legislature reduced the Governor's fiscal
1994 requests by $182 million, about half the $855 million fiscal 1993 total
surplus was used for fiscal 1994, with a June 30, 1994 forecast of $416 million
- -- $110 million allocated to the General Fund and over $305 million to rainy day
and taxpayer relief funds.
In 1994, New Jersey adopted a 5% personal income tax cut retroactive to
January 1, 1994. In 1995, New Jersey adopted a 10% personal income tax cut
retroactive to January 1, 1995. On June 26, 1995, the New Jersey State
Legislature passed an additional 15% reduction to take effect January 1, 1996.
Fiscal year 1996 ended with total revenues up 4.3% to $15.6 billion.
However, total spending increased to $16.3 billion. As of January 1, 1996, New
Jersey fulfilled Governor Whitman's promised personal income tax cut of 30%.
Even so, tax revenues were up in all categories with income tax receipts up by
4.3%. The higher spending level resulted in a decrease of total fund balances to
$880 million, down 7.5%.
The legislature is now debating a controversial Whitman proposal to issue
$2.8 billion of bonds to fund the state's pension liability. The plan would free
up $647 million of funds for the current year but has raised budgetary
sleight-of-hand concerns. Largely, however, the New Jersey economy has performed
well, growing faster than its Mid-Atlantic neighbors, though slower than the
nation as a whole.
General obligation bonds of New Jersey are the primary method for New Jersey
financing of capital projects. These bonds are backed by the full faith and
credit of New Jersey. New Jersey tax revenues and certain other fees are pledged
to meet the principal and interest payments required to fully pay the debt. No
general obligation debt can be issued by New Jersey without prior voter
approval, except that, pursuant to a constitutional amendment, no voter approval
is required for any law authorizing the creation of a debt for the purpose of
refinancing all or a portion of the outstanding debt of New Jersey, so long as
such law requires that the refinancing provides debt service savings. The New
Jersey Constitution also provides that no voter approval is required for debt
issued for purposes of war, to repel invasion, to suppress insurrection or to
meet an emergency caused by disaster or act of God. Capital construction can
also be funded by appropriation of current revenues on a pay- as-you-go basis.
All appropriations for capital projects and all proposals for State bond
authorizations are subject to the review and recommendation of the New Jersey
Commission on Capital Budgeting and Planning.
Other State-related obligations include those created pursuant to the New
Jersey Building Authority Act, which has the power to construct facilities for
leasing to the State. The rental for such buildings is equal to the debt service
relating thereto plus payments in lieu of real estate taxes. Legislation
provides for future appropriations for State aid to local school districts equal
to debt service on a maximum principal amount of $280,000,000 of bonds issued by
such local school districts for construction and renovation of school facilities
and for State aid to counties equal to debt service on up to $80,000,000 of
bonds issued by counties for construction of county college facilities.
The authorizing legislation for various State entities provides for specific
budgetary procedures with respect to certain obligations issued by such
entities. Bonds issued pursuant to authorizing legislation of this type are
sometimes referred to as "moral obligation" bonds. There is no statutory
limitation on the amount of moral obligation bonds which may be issued by
eligible State entities. Currently, there are two such entities available for
State appropriations to meet moral obligations. The New Jersey Housing and
Mortgage Finance Agency has not had a deficiency in a debt service reserve which
required New Jersey to appropriate funds. It is anticipated that the agency's
revenue will continue to be sufficient to cover debt service on its bonds. The
State provides the South Jersey Port Corporation with funds to cover all debt
service and property tax requirements when earned revenues are anticipated to be
insufficient to cover these obligations. In the past, anticipated revenues have,
in some cases, been insufficient to cover debt service and/or all property tax
requirements. There are numerous other State- created entities with outstanding
debt. This debt is supported by revenues derived from or assets of the various
projects financed by such entities.
The Local Budget Law imposes specific budgetary procedures upon counties and
municipalities, subject to review by the Director of the Division of Local
Government Services. State law also regulates the issuance of debt by counties
and municipalities by limiting the amount of tax anticipation notes that may be
issued and requiring their repayment within three months of the end of the
fiscal year in which they are issued. The Local Bond Law governs the issuance of
bonds and notes and bars the issuance of bonds for the payment of current
expenses or to pay outstanding obligations, except where permitted by the Local
Finance Board. State law also authorizes State officials to supervise fiscal
administration in any municipality facing financial difficulties.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $58,265,939. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $324,454, $412,459 and $468,562, respectively (equivalent to
0.47%, 0.46% and 0.46%, respectively, of the Portfolio's average daily net
assets for each such year). The Portfolio's Investment Advisory Agreement with
BMR is dated October 13, 1992 and may be continued as described under
"Investment Adviser and Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and 1995,
$12,070, $19,734 and $20,569, respectively, of the Fund's operating expenses
were allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $1,791, of which $1,718 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended March 31, 1997 and 1996 was $2,164 and $277, respectively, which
amounts were paid to Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $50.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $61,275 and $8,485, respectively, on portfolio security
transactions aggregating $432,619,673 and $76,006,263, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1): COMPENSATION COMPENSATION TOTAL COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ........................ $0 $1,141(2) $145,000(5)
Samuel L. Hayes, III .................... 0 1,431(3) 155,000(6)
Norton H. Reamer ........................ 0 1,311 145,000
John L. Thorndike ....................... 0 1,432(4) 148,750(7)
Jack L. Treynor ......................... 0 1,381 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $503 of deferred compensation.
(3) Includes $249 of deferred compensation.
(4) Includes $727 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from June 1, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on December 8, 1993
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge. Total return for this time period has
not been adjusted to reflect the Fund's distribution fees and/or service fees
and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF VALUE OF INVEST- ----------------------------- ------------------------------
PERIOD** DATE INVESTMENT* MENT ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- -------------- ------------- ------------------ -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 6/1/92 $977.03 $1,216.74 24.53% 4.65% 21.67% 4.15%
1 Year Ended
3/31/97 3/31/96 $977.75 $1,016.29 3.94% 3.94% 1.63% 1.63%
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.
- ------------
*Initial investment less the maximum sales charge of 2.25%.
** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
3.69%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 3.69% (considering both State and
federal taxes) would be 5.71%, assuming a combined federal and State tax rate of
35.40%. If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
STATE AND LOCAL TAXES
If, in any year in which the Fund is subject to New Jersey taxation, it is
treated as a qualified investment fund under New Jersey law, as defined below,
the Fund will not be required to pay any New Jersey state tax, except for a $250
New Jersey Corporation business (franchise) tax. A "qualified investment fund"
is any investment company or trust registered with the Commission, or any series
of such investment company or trust, which, for the calendar year in which the
distribution is paid, (a) has no investments other than interest-bearing
obligations, obligations issued at a discount, and cash and cash items,
including receivables and financial options, futures, forward contracts, or
other similar financial instruments related to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto, and (b) has
not less than 80% (determined at the end of each fiscal quarter) of the
aggregate principal amount of all of its investments, excluding financial
options, futures, forward contracts, or other similar financial instruments
related to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto to the extent such instruments are authorized by
Section 851(b) of the Code, cash and cash items (including receivables), in
obligations (1) issued by or on behalf of New Jersey or any county,
municipality, school or other district, agency, authority, commission,
instrumentality, public corporation, body corporate and politic or political
subdivision of New Jersey, or (2) statutorily free from New Jersey or local
taxation under other acts of New Jersey or under the laws of the United States,
including, but not limited to, obligations of Puerto Rico, the Virgin Islands
and Guam (collectively, "Qualifying Investments").
In the opinion of Wilentz, Goldman, & Spitzer, P.A., special counsel to the
Fund, under existing New Jersey law provided the Fund qualifies, and continues
to qualify, as a qualified investment fund, shareholders will not be required to
include in their New Jersey gross income distributions from the Fund to the
extent that such distributions are attributable to interest or gains from
Qualifying Investments. The foregoing exclusion applies only to shareholders who
are individuals, estates or trusts subject to the New Jersey gross income tax.
Distributions from the Fund will not be excluded from net income and shares of
the Fund will not be excluded from investment capital in determining New Jersey
corporation business (franchise) and corporation income taxes for corporate
Shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 and Donaldson Lufkin Jenrette Securities Corporation, Inc., Jersey City,
NJ 07303-9998, were the record owners of approximately 36.61% and 5.18%,
respectively, of the outstanding shares, which were held on behalf of their
customers who are the beneficial owners of such shares, and as to which it has
voting power under certain limited circumstances. In addition, as of June 30,
1997, the following shareholders owned of record the percentages of shares
indicated after their names: Florence Heimburg, Oradell, NJ 07649 (5.41%). To
the knowledge of the Trust, no other person owned of record or beneficially 5%
or more of the Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Classic New Jersey Limited Maturity Tax
Free Fund to EV Classic New Jersey Limited Maturity Municipals Fund on December
15, 1995 and to EV Traditional New Jersey Limited Maturity Municipals Fund on
February 1, 1996.
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
Jersey State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
A FEDERAL AND NEW JERSEY STATE
COMBINED TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ----------------------- -------------------- NJ STATE ---------------------------------------------------------------------
(TAXABLE INCOME)* TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- --------------------------------------------- ------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 16.49% 4.79% 5.39% 5.99% 6.59% 7.18% 7.78% 8.38%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 31.98% 5.88 6.62 7.35 8.09 8.82 9.56 10.29
$ 59,751-$124,650 $ 99,601-$151,750 35.40% 6.19 6.97 7.74 8.51 9.29 10.06 10.84
$124,651-$271,050 $151,751-$271,050 40.08% 6.68 7.51 8.34 9.18 10.01 10.85 11.68
Over $271,050 Over $271,050 43.45% 7.07 7.96 8.84 9.73 10.61 11.49 12.38
* Net amount subject to federal and New Jersey personal income tax after deductions and exemptions.
+ The combined federal and New Jersey tax brackets are calculated using the highest New Jersey State rate applicable within each
bracket. Taxpayers with taxable income within such brackets may have lower combined tax brackets and taxable equivalent yields
than indicated above. The combined tax brackets assume that New Jersey taxes are itemized deductions for federal income tax
purposes. Investors who do not itemize deductions on their federal income tax return will have a higher combined bracket and
higher taxable equivalent yield then those indicated above. The applicable federal tax rates within the brackets are 15%, 28%,
31%, 36% and 39.6%, over the same ranges of income.
</TABLE>
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including New Jersey State income taxes)
for taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and New Jersey personal income taxes, other income
received by the Portfolio and allocated to the Fund may be taxable. The table
does not take into account state or local taxes, if any, payable on Fund
distributions except for New Jersey personal income taxes. It should also be
noted that the interest earned on certain "private activity bonds" issued after
August 7, 1986, while exempt from the regular federal income tax, is treated as
a tax preference item which could subject the recipient to the AMT. The
illustrations assume that the AMT is not applicable and do not take into account
any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NEW YORK LIMITED
MATURITY MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain New York considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
New York issuers. Such information supplements the information in the Prospectus
and 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 New York issuers.
Neither the Trust nor the Portfolio has independently verified this information.
The recession lasted longer in New York and the State's economic recovery
has lagged behind the nation's. Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been below the
national average primarily due to significant cutbacks in the computer,
manufacturing, utility, defense and banking industries. New York's economy is
expected to continue to expand modestly during 1997. The unemployment rate for
the State in February, 1997 was 6.3%, unchanged from last year, versus 5.3% for
the nation. New York City's unemployment rate was 8.8% for 1996, up from 8.2% a
year earlier.
In July 1995, the State Comptroller issued its audit of the State's
1994-1995 fiscal year prepared in accordance with generally accepted auditing
standards. The State completed its 1994-1995 fiscal year with a General Fund
operating deficit of $1.426 billion, as compared with an operating surplus of
$914 million for the previous fiscal year. The 1994-1995 fiscal year deficit was
caused by several factors including the adoption of changes in accounting
methodologies by the State Comptroller. The State used $1.026 billion of the
1993-1994 fiscal year surplus in the 1994-1995 fiscal year.
The State ended its 1995-1996 fiscal year in balance, with a reported
1995-1996 General Fund cash surplus of $445 million. Prior to adoption of the
State's 1995-1996 fiscal year budget, the State had projected a potential budget
gap of approximately $5 billion, which was closed primarily through spending
reductions, cost containment measures, State agency actions and local assistance
reforms.
The State ended its 1997 fiscal year with a $145 million surplus, leaving a
total fund balance of $433 million. The surplus was due mainly to an increase of
tax revenues in the wake of tax reductions in 1996, with personal income tax
receipts up 2.0%, sales tax up 4.4%, business taxes up 4.4%, and consumer taxes
and fees up 2.5%. Tax collections were particularly enhanced by the booming
financial sector. Growth in that sector is expected to slow in fiscal year 1998,
which could impact tax revenue growth. Government spending also declined by
0.9%, particularly capital spending and debt service.
During the past several years, the State has been forced to borrow on a
seasonal basis due to cash flow timing problems. In June, 1990, the Local
Government Assistance Corporation ("LGAC") was formed as a public benefit
corporation for the purpose of issuing long term obligations designed to
eliminate this need. The legislation which created the LGAC specified that the
obligations will be amortized over no more than 30 years and put a $4.7 billion
dollar cap, net of LGAC proceeds, on the seasonal borrowing program. As of June
1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion
completing the program. This cap may be exceeded in cases where the Governor and
the legislature have certified the need for additional borrowing and have
devised a method for reducing it back to the cap no later than the fourth fiscal
year after the limit is exceeded. If this cap were to be exceeded, it could
result in action by the rating agencies which could adversely affect prices of
bonds held by the Portfolio.
In 1975, New York City encountered severe financial difficulties which
impaired and continues to impair the borrowing ability of the City. For each of
the 1981 through 1996 fiscal years, the City achieved balanced operating results
as reported in accordance with generally accepted accounting principles.
Pursuant to the laws of the State, the City prepares a four-year annual
financial plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections and outlines
proposed gap-closing programs for years with projected budget gaps. The City
implemented various actions to close projected budget gaps of $3.3 billion, $2.3
billion, $3.1 billion and $2.7 billion for the 1994, 1995, 1996 and 1997 fiscal
years, respectively. Such actions included, among others, tax increases, service
and personnel reductions, productivity savings, debt refinancings, asset sales
and cost savings related to employee benefits. For the 1998 fiscal year, the
City previously projected a budget gap of $720 million after taking into account
the prepayment in the 1997 fiscal year of $856 million of debt service due in
the 1998 and 1999 fiscal years. Various gap-closing actions to balance the 1998
fiscal year budget include advancing fiscal year 1997 surplus into fiscal year
1998, reductions in entitlement programs, federal welfare reform savings,
additional state aid, cost saving initiatives and asset sales. The City
currently projects budget gaps of $2.0 billion, $2.9 billion and $2.7 billion
for its 1999, 2000 and 2001 fiscal years, respectively. The City's gap-closing
plans for the 1999 through 2001 fiscal years include savings from restructuring
city government and privatization, City agency actions, additional State aid,
asset sales and cost saving actions related to entitlement programs and
procurement. There can be no assurance that additional gap-closing measures will
not be required, the implementation of which could adversely affect the City's
economic base, and there is no assurance that such measures will enable the City
to achieve a balanced budget, as required by State law, for any of the 1998
through 2001 fiscal years. Implementation of the City's four-year annual
financial plan is also dependent upon the City's ability to market its
securities successfully in the public credit markets. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $5.7
billion of general obligation bonds and $5.7 billion of bonds to be issued by
the New York City Transitional Finance Authority (TFA) primarily to reconstruct
and rehabilitate the City's infrastructure and physical assets and to make other
capital investments. In 1997, the State enacted the New York City Transitional
Finance Authority Act (the "Finance Authority Act"), which created the TFA, to
assist the City to avoid certain state constitutional debt limitations. The TFA
is authorized to issue up to $7.5 billion in long-term debt. On June 2, 1997 an
action was brought in the State Supreme Court, Albany County seeking a
declaratory judgment declaring that the Finance Authority Act to be
unconstitutional. If the Finance Authority Act were voided, and depending on
whether the New York State Legislature took other action which would provide
relief to the City under the general debt limit, the City might be required to
curtail its currently defined capital program early in the 1998 fiscal year. The
fiscal health of New York City, which is the largest issuer of municipal bonds
in the country and a leading international commercial center, exerts a
significant influence upon the fiscal health and bond values of issues
throughout the State. Bond values of the Municipal Assistance Corporation, the
State of New York, the New York Local Government Assistance Corporation, the New
York State Dormitory Authority, the New York City Municipal Water Finance
Authority and The Metropolitan Transportation Authority would be particularly
affected by serious financial difficulties encountered by New York City. The
Portfolio could be expected to hold bonds issued by many, if not all of these
issuers, at any given time.
As of 1997, the City's general obligation bonds were rated "Baa1," "BBB+"
and "A-" by Moody's, S&P and Fitch, respectively. On July 10, 1995, S&P revised
downward its rating on City general obligation bonds from A- to BBB+. On
February 28, 1996, Fitch placed the City's general obligation bonds on Fitch
Alert with negative implications. On November 5, 1996, Fitch removed the City's
general obligation bonds from FitchAlert, although Fitch stated that the outlook
remains negative.There is no assurance that such ratings will continue for any
given period of time or that they will not be revised downward or withdrawn
entirely. Any such downward revision or withdrawal could have an adverse effect
on obligations held by the Portfolio. Ratings for the State are Moody's "A(2)",
S&P "A-" and Fitch "A+".
The State's economic and fiscal viability are mutually and intricately tied
to those of its authorities and localities, which make up the major portion of
State bond issuance. Any serious financial difficulties encountered by these
entities, including their inability to access capital markets, would have a
significant, adverse effect upon the value of bonds issued elsewhere within the
State and thus upon the value of the interests in the Portfolio. State plans to
reduce aid to local cities and towns may have a negative impact on municipal
finances and ratings throughout the State. Such ratings changes could erode the
value of their bonds and/or lead to defaults.
The State either guarantees or supports lease-purchase agreements or
contractual obligations, financing arrangements or through moral obligation
provisions, a large amount of Authority indebtedness. While debt service is
normally paid out of revenues generated by the projects of the Authorities, the
State has, from time to time, had to appropriate amounts to enable the
Authorities to meet their financial obligations and, in some cases, to prevent
default.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $100,013,748. For the
fiscal years ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR
advisory fees of $557,305, $722,493 and $845,836, respectively (equivalent to
0.46% of the Portfolio's average daily net assets for each such year). The
Portfolio's Investment Advisory Agreement with BMR is dated October 13, 1992 and
may be continued as described under "Investment Adviser and Administrator" in
Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997, 1996 and for
the period from the start of business, July 6, 1994, to March 31, 1995, $17,497,
$17,527, and $13,702, respectively, of the Fund's operating expenses were
allocated to the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $455, all of which was paid to Authorized
Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sale of shares of the Fund during the fiscal
years ended March 31, 1997, 1996 and for the period from the start of business,
July 6, 1994, to March 31, 1995 were $3,684, $9,921 and $3,211, respectively, of
which $101, $33 and $13, respectively, was received by the Principal Underwriter
and $3,583, $9,888 and $3,198, respectively, was received by Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $10.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $40,494 and $11,615, respectively, on portfolio
security transactions aggregating $360,095,562 and $104,037,530, respectively,
to firms which provided some research services to BMR or its affiliates
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended March 31, 1995, the Portfolio paid no brokerage commissions on
portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $0 $1,557(2) $145,000(5)
Samuel L. Hayes, III .......................... 0 1,808(3) 155,000(6)
Norton H. Reamer .............................. 0 1,687 145,000
John L. Thorndike ............................. 0 1,818(4) 148,750(7)
Jack L. Treynor ............................... 0 1,796 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
</TABLE>
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, Nicole Anderes (35) is a Vice President of
the Portfolio. Ms. Anderes has served as a Vice President of the Portfolio since
June 23, 1997. Ms. Anderes has been a Vice President of BMR and Eaton Vance
since 1994 and is an officer of various investment companies managed by Eaton
Vance or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from May 29, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on July 6, 1994
reflect the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge. Total return for this time period has
not been adjusted to reflect the Fund's distribution fees and/ or service fees
and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD** DATE INVESTMENT* ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------- ---- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 5/29/92 $977.44 $1,242.74 27.14% 5.09% 24.27% 4.59%
1 Year Ended
3/31/97 3/31/96 $977.05 $1,012.04 3.58% 3.58% 1.20% 1.20%
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.
- ------------
*Initial investment less the current maximum sales charge of 2.25%.
**If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.48%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.48% would be 7.34%, assuming a
combined federal and State tax rate of 38.99%. If a portion of the Fund's
expenses had not been allocated to the Administrator, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
ADDITIONAL TAX MATTERS
In any year in which the Fund is subject to New York taxation, qualifies as
a regulated investment company under Subchapter M of the Code and distributes
all of its investment company taxable income and net capital gains, the Fund
will not be required to pay any New York State franchise tax or New York City
general corporation tax, with the possible exception of certain nominal minimum
taxes.
Distributions from the Fund will not be excluded from net income and shares
of the Fund will not be excluded from investment capital in determining New York
State or City franchise and corporation taxes for corporate shareholders.
Shares of the Fund will not be subject to the New York State or City
property tax.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 39.16% of the outstanding shares,
which were held on behalf of its customers who are the beneficial owners of such
shares, and as to which they have 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 names: Walter O. Roberts Jr., Kenmore, NY 14217 (16.27%);
Tice & Co., FBO Manufacturers & Traders, Buffalo, NY 14240 (9.98%); and NFSC
FEBO #CIA-341070, Victor Maruri, Chappaqua, NY 10514 (8.79%). To the knowledge
of the Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
OTHER INFORMATION
The Fund changed its name from EV Traditional New York Limited Maturity Tax
Free Fund to EV Traditional New York Limited Maturity Municipals Fund on
December 15, 1995.
<PAGE>
TAX EQUIVALENT YIELD TABLES
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State and New York City income tax laws in effect for 1997.
<TABLE>
<CAPTION>
COMBINED
FEDERAL,
SINGLE RETURN JOINT RETURN NY STATE A FEDERAL, NEW YORK STATE AND NEW YORK CITY TAX EXEMPT YIELD OF:
- ------------------------- ---------------------- AND NY CITY ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------------- --------------- ---------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 24.55% 5.30% 5.96% 6.63% 7.29% 7.95% 8.62% 9.28%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 36.14 6.26 7.05 7.83 8.61 9.40 10.18 10.96
$ 59,751 - $124,650 $ 99,601 - $151,750 38.80 6.54 7.35 8.17 8.99 9.80 10.62 11.44
$124,651 - $271,050 $151,751 - $271,050 43.24 7.05 7.93 8.81 9.69 10.57 11.45 12.33
Over $271,050 Over $271,050 46.43 7.47 8.40 9.33 10.27 11.20 12.13 13.07
* Net amount subject to federal, New York State and New York City personal income tax (including New York City personal income
tax surcharges) after deductions and exemptions.
+ The first combined tax bracket is calculated using the highest State rate (6.85%) and the highest City rate (including
surcharges) within the bracket. Taxpayers with taxable income below the highest dollar amount in the first bracket may have a
lower combined tax bracket and taxable equivalent yield than indicated above. The applicable State and City rates are at their
maximum (6.85% and 4.457%, respectively) throughout all other brackets. The applicable federal tax rates within each of these
combined tax brackets are 15%, 28%, 31%, 36%, and 39.6% over the same ranges of income.
</TABLE>
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and New
York State income tax laws in effect for 1996.
<TABLE>
<CAPTION>
COMBINED
SINGLE RETURN JOINT RETURN FEDERAL AND A FEDERAL AND NEW YORK STATE TAX EXEMPT YIELD OF:
- ------------------------- ---------------------- NY STATE ---------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ------------------------------------------------- --------------- ---------------------------------------------------------------
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 20.82% 5.05% 5.68% 6.31% 6.95% 7.58% 8.21% 8.84%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.93 5.96 6.71 7.46 8.20 8.95 9.69 10.44
$ 59,751 - $124,650 $ 99,601 - $151,750 35.73 6.22 7.00 7.78 8.56 9.34 10.11 10.89
$124,651 - $271,050 $151,751 - $271,050 40.38 6.71 7.55 8.39 9.23 10.06 10.90 11.74
Over $271,050 Over $271,050 43.74 7.11 8.00 8.89 9.78 10.66 11.55 12.44
* Net amount subject to federal and New York State and personal income tax after deductions and exemptions.
+ The first combined tax bracket is calculated using the highest State rate (6.85%) within the bracket.
</TABLE>
Taxpayers with taxable income below the highest dollar amount in the first
bracket may have a lower combined tax bracket and taxable equivalent yield than
indicated above. The applicable State rate is the maximum rate, 6.85%,
throughout all other brackets. 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.
Note: Yields shown are for illustration purposes only and are not meant to
represent the Fund's actual yield. No assurance can be given that the Fund will
achieve any specific tax exempt yield. While it is expected that the Portfolio
will invest principally in obligations, the interest from which is exempt from
the regular federal income tax and New York State and New York City personal
income taxes, other income received by the Portfolio and allocated to the Fund
may be taxable. The table does not take into account state or local taxes, if
any, payable on Fund distributions except for New York State and New York City
personal income taxes. It should also be noted that the interest earned on
certain "private activity bonds" issued after August 7, 1986, while exempt from
the regular federal income tax, is treated as a tax preference item which could
subject the recipient to the AMT. The illustrations assume that the AMT is not
applicable and do not take into account any tax credits that may be available.
The above-indicated combined federal and New York State/City income brackets
assume State and City taxes are itemized deductions and do not take into account
the effect of a reduction in the deductibility of itemized deductions (including
New York State and City income taxes) for taxpayers with adjusted gross income
in excess of $121,200, nor do they reflect phaseout of personal exemptions for
single and joint filers with adjusted gross income in excess of $121,200 and
$181,800, respectively. The effective combined tax brackets and equivalent
taxable yields of taxpayers who do not itemize or who are subject to such
limitations will be higher than those indicated above. In addition, investors
who do not itemize deductions on their federal income tax returns will have
higher combined brackets and equivalent taxable yields than indicated above.
The information set forth above is as of the date of this SAI. Subsequent
tax law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL OHIO LIMITED MATURITY
MUNICIPALS FUND.
RISKS OF CONCENTRATION
The following information as to certain Ohio considerations is given to
investors in view of the Portfolio's policy of concentrating its investments in
Ohio issuers. Such information supplements the information in the Prospectus and
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 Ohio issuers. Neither
the Trust nor the Portfolio has independently verified this information.
The State of Ohio operates on the basis of a fiscal biennium for its
appropriations and expenditures. The State is effectively prohibited by law from
ending a fiscal year or a biennium in a deficit position. The Governor has the
power to order State agencies to operate within the State's means. The State
carries out most of its operations through the General Revenue Fund ("GRF")
which receives general State revenues not otherwise dedicated. GRF revenues are
derived mainly from personal income and sales taxes and corporate franchise
taxes. State GRF figures generally show a pattern related to national economic
conditions, evident in growth and depletion of its GRF ending fund balances,
with the June 30 (end of fiscal year) GRF fund balance reduced during less
favorable national economic periods and increased during more favorable economic
periods.
The general appropriations act for the 1994-95 biennium appropriated $30.7
billion for GRF purposes. Appropriations for the first fiscal year of the
biennium were approximately 9.2% above those for fiscal year 1993 while those
for the second year were approximately 6.6% higher than those for fiscal year
1994. These additional appropriations were mainly for increased costs in most
State financed programs such as education, Medicaid, mental health and
corrections. During the 1992-1993 biennium, the national economic downturn
required a $300.2 million transfer from the Budget Stabilization Fund ("BSF") to
the GRF. As fiscal year 1992 progressed, reduced tax collections led to a
revenue shortfall. This, in combination with additional expenditures, produced a
budget deficit. The State addressed this deficit through a combination of budget
cuts, tax payment accelerations and a depletion of the BSF. A projected fiscal
year 1993 gap of $520 million was covered through a combination of tax increases
and a reduction in appropriations. The fiscal year 1994 budget was balanced, and
the State's GRF had an ending fund balance of $560 million. The State's
financial position continued to improve in 1995. The 1996-97 biennial budget
calls for GRF expenditures to increase 9.1% over the 1995-96 biennium.
For the fiscal year ended June 30, 1996, the Budget Stabilization Fund was
up to $828.3 million and the GRF had a $781 million fund balance.
Local school districts in Ohio receive a major portion of their operating
monies from State subsidies, but are dependent upon local taxes for significant
portions of their budgets. School districts may submit for voter approval income
taxes on the district income of individuals and estates. To date, this income
tax has been approved in 119 of the State's 600+ local school districts. A small
number of local school districts have in any year required special assistance
from the State under a prior program in order to avoid year-end deficits.
Forty-four school districts borrowed $68.6 million in fiscal year 1992 and 27
districts borrowed $94.5 million in 1993, including Cleveland which borrowed $75
million. Twenty-eight districts borrowed $41.1 million in fiscal year 1994,
twenty-nine districts borrowed $71.1 million in fiscal year 1995 and twenty
districts borrowed $87 million in fiscal year 1996. Schools were affected by
budget-balancing expenditure reductions discussed above.
Litigation, similar to that in other states,has been pending questioning the
constitutionality of Ohio's system of school funding. The Ohio Supreme Court
concluded that aspects of the system (including basic operating assistance) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order for a year to permit
time for responsive corrective actions. At this time, it is not possible to
determine either the outcome or the financial burden which an unfavorable
decision would have on either the State's or the local school districts'
financial health.
FEES AND EXPENSES
INVESTMENT ADVISER
As of March 31, 1997, the Portfolio had net assets of $28,469,852. For the
fiscal years ended March 31, 1997 and 1996, the Portfolio paid BMR advisory fees
of $146,515 and $173,867, respectively (equivalent to 0.48% and 0.47%,
respectively, of the Portfolio's average daily net assets for each such year).
For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio
would have paid BMR advisory fees of $185,368 (equivalent to 0.46% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, BMR made a reduction of its advisory fee in the amount of
$44,856. The Portfolio's Investment Advisory Agreement with BMR is dated April
9, 1993 and may be continued as described under "Investment Adviser and
Administrator" in Part I.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1997 and 1995, $2,552
and $23,965, respectively, of the Fund's operating expenses were allocated to
the Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $3,467, all of which was paid to Authorized
Firms.
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended March 31, 1997 and 1996 were $956 and $2,004, respectively, which
amounts were paid to Authorized Firms.
For the fiscal year ended March 31, 1997, the Fund paid the Principal
Underwriter $122.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $14,023 and $2,992, respectively, on portfolio security
transactions aggregating $98,188,413 and $26,785,801, respectively, to firms
which provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities). For the fiscal year ended March 31,
1995, the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $0 $346(2) $145,000(5)
Samuel L. Hayes, III .......................... 0 315(3) 155,000(6)
Norton H. Reamer .............................. 0 313 145,000
John L. Thorndike ............................. 0 322(4) 148,750(7)
Jack L. Treynor ............................... 0 346 150,000
</TABLE>
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $153 of deferred compensation.
(3) Includes $52 of deferred compensation.
(4) Includes $158 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
ADDITIONAL OFFICER INFORMATION
In addition to the officers of the Portfolio listed under "Officers of the
Trust and the Portfolio" in Part I, William H. Ahern, Jr. (38) is a Vice
President of the Portfolio. Mr. Ahern has served as a Vice President of the
Portfolio since June 19, 1995. Mr. Ahern has been Vice President of Eaton
Vance and BMR since January, 1996 and an employee of Eaton Vance since 1989.
Mr. Ahern is an officer of various investment companies managed by Eaton Vance
or BMR.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from April 16, 1993 through
March 31, 1997 and for the one-year period ended March 31, 1997. The total
return for the period prior to the Fund's commencement of operations on December
8, 1993 reflects the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge. Total return for this time
period has not been adjusted to reflect the Fund's distribution fees and/or
service fees and certain other expenses. If such adjustment were made, the
performance would have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT -------------------------- -------------------------
PERIOD** DATE INVESTMENT* ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 4/16/93 $977.54 $1,127.88 15.38% 3.68% 12.79% 3.09%
1 Year Ended
3/31/97 3/31/96 $977.62 $1,019.41 4.27% 4.27% 1.94% 1.94%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ----------
* Initial investment less the maximum sales charge of 2.25%.
** If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.22%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.22% would be 6.57%, assuming a
combined federal and State tax rate of 35.76%. If a portion of the Fund's
expenses had not been allocated to the Administrator, the Fund would have had a
lower yield.
See the Tax Equivalent Yield Table for information concerning applicable tax
rates and income brackets.
TAXES
In the opinion of special tax counsel to the Fund, Squire, Sanders & Dempsey
L.L.P., under Ohio law, provided that the Fund continues to qualify as a
regulated investment company under the Code and that at all times at least 50%
of the value of the total assets of the Fund consists of obligations issued by
or on behalf of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of Ohio or its political subdivisions ("Ohio Obligations"), or
similar obligations of other states or their subdivisions (a fund satisfying
such requirements being referred to herein as an "Ohio fund"), distributions
paid by the Fund with respect to shares ("Distributions") that are properly
attributable to interest payments on Ohio Obligations will be exempt from Ohio
personal income tax and any municipal and school district income taxes in Ohio.
In addition, Distributions of "capital gain dividends," as defined in the Code,
that are properly attributable to the Fund's capital gains on the sale, exchange
or other disposition of Ohio Obligations, will be exempt from Ohio personal
income tax and any municipal or school district income taxes in Ohio. Except as
described below, other Distributions will generally not be exempt from Ohio
personal income tax and municipal and school district income taxes in Ohio.
Provided the Fund qualifies as an Ohio fund, Distributions will be excluded
from the net income base of the Ohio corporation franchise tax to the extent
that such Distributions (i) represent exempt-interest dividends for federal
income tax purposes or (ii) are properly attributable to interest payments on
Ohio Obligations or profit on the sale, exchange or other disposition of Ohio
Obligations. However, shares of the Fund will not be excluded from the net worth
base for purposes of the Ohio corporation franchise tax.
Provided the Fund qualifies as an Ohio fund, distributions by the Fund that
are properly attributable to interest on obligations of the United States or the
governments of Puerto Rico, the Virgin Islands or Guam or their authorities or
municipalities are exempt from Ohio personal income tax and any municipal and
school district income taxes in Ohio, and are excluded from the net income base
of the Ohio corporate franchise tax to the same extent that such interest would
be so exempt or excluded if the obligations were held directly by the
shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 27.84% 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 has voting power under certain limited circumstances.
In addition, as of such date, the following shareholder owned of record, the
percentage of shares indicated: Herbert Hampson & Lois Hampson JTTEN S ACCT,
Grafton, OH 44044 (35.27%). To the knowledge of the Trust, no other person owned
of record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
OTHER INFORMATION
The Fund changed its name from EV Classic Ohio Limited Maturity Tax Free
Fund to EV Classic Ohio Limited Maturity Municipals Fund on December 15, 1995
and to EV Traditional Ohio Limited Maturity Municipals Fund on February 1, 1996.
<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding from 4% to 7% under the regular federal income tax and the
Ohio State income tax laws and tax rates applicable for 1997.
<TABLE>
<CAPTION>
COMBINED A FEDERAL AND OHIO STATE TAX EXEMPT YIELD OF:
SINGLE RETURN JOINT RETURN FEDERAL AND 4% 4.5% 5% 5.5% 6% 6.5% 7%
- --------------------- -------------------- OHIO STATE -----------------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- ------------------------------------------- ------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $ 24,650 Up to $ 41,200 19.42% 4.96% 5.58% 6.21% 6.83% 7.45% 8.07% 8.69%
$ 24,651 - $ 59,750 $ 41,201 - $ 99,600 32.28 5.91 6.64 7.38 8.12 8.86 9.60 10.34
$ 59,751 - $124,650 $ 99,601 - $151,750 35.76 6.23 7.01 7.78 8.56 9.34 10.12 10.90
$124,651 - $271,050 $151,751 - $271,050 40.80 6.76 7.60 8.45 9.29 10.14 10.98 11.82
Over $271,050 Over $271,050 44.13 7.16 8.05 8.95 9.84 10.74 11.63 12.53
</TABLE>
*Net amount subject to federal and Ohio personal income tax after deductions and
exemptions.
+The combined tax brackets are calculated using the highest Ohio State rate
within the bracket. The combined tax brackets assume that Ohio taxes are
itemized deductions for federal income tax purposes. Investors who do not
itemize deductions on their federal income tax return will have a higher
combined bracket and higher taxable equivalent yield than those indicated
above. The applicable federal tax rates within each of these combined brackets
are 15%, 28%, 31%, 36% and 39.6% over the same ranges of income.
Note: The federal income tax portion of above-indicated combined income tax
brackets does not take into account the effect of a reduction in the
deductibility of itemized deductions (including Ohio State income taxes) for
taxpayers with adjusted gross income in excess of $121,200. The tax brackets
also do not show the effects of phaseout of personal exemptions for single
filers with adjusted gross income in excess of $121,200 and joint filers with
adjusted gross income in excess of $181,800. The effective tax brackets and
equivalent taxable yields of such taxpayers will be higher than those indicated
above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations the interest from which is exempt from the
regular federal income tax and Ohio personal income taxes, other income received
by the Portfolio and allocated to the Fund may be taxable. The table does not
take into account state or local taxes, if any, payable on Fund distributions
except for Ohio personal income taxes. It should also be noted that the interest
earned on certain "private activity bonds" issued after August 7, 1986, while
exempt from the regular federal income tax, is treated as a tax preference item
which could subject the recipient to the AMT. The illustrations assume that the
AMT is not applicable and do not take into account any tax credits that may be
available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult with their tax adviser for additional information.
<PAGE>
[LOGO]
EATON VANCE
==================
Mutual Funds
EV TRADITIONAL
LIMITED MATURITY
MUNICIPAL FUNDS
STATEMENT OF
ADDITIONAL INFORMATION
AUGUST 1, 1997
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
EV TRADITIONAL
LIMITED MATURITY
MUNICIPAL FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte &Touche LLP, 125 Summer Street, Boston, MA 02110
T-LC8/1SAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV CLASSIC NATIONAL LIMITED
MATURITY MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic National Limited Maturity Municipals Fund
(the "Fund"), National Limited Maturity Municipals Portfolio (the "Portfolio")
and certain other series of Eaton Vance Investment Trust (the "Trust"). Part II
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional
Fund-specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS Page
PART I
<TABLE>
<S> <C>
Additional Information about Investment Policies.............................................. 2
Investment Restrictions....................................................................... 8
Trustees and Officers......................................................................... 10
Investment Adviser and Administrator.......................................................... 12
Custodian..................................................................................... 14
Service for Withdrawal........................................................................ 15
Determination of Net Asset Value.............................................................. 15
Investment Performance........................................................................ 16
Taxes......................................................................................... 18
Portfolio Security Transactions............................................................... 20
Other Information............................................................................. 22
Independent Certified Public Accountants...................................................... 23
Financial Statements.......................................................................... 23
Tax Equivalent Yield Table.................................................................... 24
Appendix...................................................................................... 25
PART II
Fees and Expenses............................................................................. a-1
Principal Underwriter......................................................................... a-2
Distribution Plan............................................................................. a-2
Performance Information....................................................................... a-5
Control Persons and Principal Holders of Securities........................................... a-5
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS 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
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to obtain funds for various public and
private purposes. Such obligations include bonds as well as tax-exempt
commercial paper, project notes and municipal notes such as tax, revenue and
bond anticipation notes of short maturity, generally less than three years. In
general, there are three categories of municipal obligations, the interest on
which is exempt from federal income tax and is not a tax preference item for
purposes of the AMT: (i) certain "public purpose" obligations (whenever issued),
which include obligations issued directly by state and local governments or
their agencies to fulfill essential governmental functions; (ii) certain
obligations issued before August 8, 1986 for the benefit of non-governmental
persons or entities; and (iii) certain "private activity bonds" issued after
August 7, 1986, which include "qualified Section 501(c)(3) bonds" or refundings
of certain obligations included in the second category. In assessing the federal
income tax treatment of interest on any municipal obligation, the Portfolio will
generally rely on an opinion of the issuer's counsel (when available) and will
not undertake any independent verification of the basis for the opinion. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds.
Interest on certain "private activity bonds" issued after August 7, 1986 is
exempt from regular federal income tax but such interest (including a
distribution by the Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the recipient's
liability for the AMT. For corporate shareholders, the Fund's distributions
derived from interest on all municipal obligations (whenever issued) is included
in "adjusted current earnings" for purposes of the AMT as applied to
corporations (to the extent not already included in alternative minimum taxable
income as income attributable to private activity bonds).
Any recognized gain or income attributable to market discount on long-term
tax-exempt municipal obligations (i.e., obligations with a term of more than one
year) purchased after April 30, 1993 other than, in general, at their original
issue is taxable as ordinary income. A long-term debt obligation is generally
treated as acquired at a market discount if purchased after its original issue
at a price less than (i) the stated principal amount payable at maturity, in the
case of an obligation that does not have original issue discount or (ii) in the
case of an obligation that does have original issue discount, the sum of the
issue price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimis exclusion.
Issuers of general obligation bonds include states, counties, cities, towns
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects including the construction or improvement of
schools, highways and roads, water and sewer systems and a variety of other
public purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate and amount.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water, sewer and solid waste disposal systems; highways, bridges
and tunnels; port, airport and parking facilities; transportation systems;
housing facilities, colleges and universities and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may be used to
make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security including partially or fully
insured, rent subsidized and/or collateralized
2
<PAGE>
mortgages, and/or the net revenues from housing or other public projects. In
addition to a debt service reserve fund, some authorities provide further
security in the form of a state's ability (without legal obligation) to make up
deficiencies in the debt service reserve fund. Lease rental revenue bonds issued
by a state or local authority for capital projects are normally secured by
annual lease rental payments from the state or locality to the authority
sufficient to cover debt service on the authority's obligations. Such payments
are usually subject to annual appropriations by the state or locality.
Industrial development and pollution control bonds, although nominally
issued by municipal authorities, are in most cases revenue bonds and are
generally not secured by the taxing power of the municipality, but are usually
secured by the revenues derived by the authority from payments of the industrial
user or users.
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 municipal obligation are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any person or entity to pay when due
principal of and interest on a municipal obligation may be materially affected.
There have been recent instances of defaults and bankruptcies involving
municipal obligations which were not foreseen by the financial and investment
communities. 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 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 municipal obligations are dependent on a variety of factors,
including purposes of issue and source of funds for repayment, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, maturity of the obligation and rating of the issue. The
ratings of Moody's, S&P and Fitch represent their opinions as to the quality of
the municipal obligations which they undertake to rate. It should be emphasized,
however, that ratings are based on judgment and are not absolute standards of
quality. Consequently, municipal obligations with the same maturity, coupon and
rating may have different yields while obligations of the same maturity and
coupon with different ratings may have the same yield. In addition, the market
price of municipal 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
Obligations of Particular Types of Issuers. The Portfolio may invest 25% or
more of its total assets in municipal obligations whose issuers are located in
the same state or in municipal obligations of the same type. There could be
economic, business or political developments which might affect all municipal
obligations of the same type. In particular, investments in industrial revenue
bonds listed 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
3
<PAGE>
service its debt are demand for hospital services, the ability of the hospital
to provide the services required, management capabilities, economic developments
in the service area, efforts by insurers and government agencies to limit rates
and expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding and possible federal legislation limiting the rates of increase
of hospital charges.
Electric utilities face problems in financing large construction programs in
an inflationary period, cost increases and delay occasioned by safety and
environmental considerations (particularly with respect to nuclear facilities),
difficulty in obtaining fuel at reasonable prices and in achieving timely and
adequate rate relief from regulatory commissions, effects of energy conservation
and limitations on the capacity of the capital market to absorb utility debt.
Life care facilities are an alternative form of long-term housing for the
elderly which offer residents the independence of a condominium life style and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state and local authorities. Since
the bonds are normally secured only by the revenues of each facility and not by
state or local government tax payments, they are subject to a wide variety of
risks. Primarily, the projects must maintain adequate occupancy levels to be
able to provide revenues sufficient to meet debt service payments. Moreover,
since a portion of housing, medical care and other services may be financed by
an initial deposit, it is important that the facility maintain adequate
financial reserves to secure estimated actuarial liabilities. The ability of
management to accurately forecast inflationary cost pressures is an important
factor in this process. The facilities may also be affected adversely by
regulatory cost restrictions applied to health care delivery in general,
particularly state regulations or changes in Medicare and Medicaid payments or
qualifications, or restrictions imposed by medical insurance companies. They may
also face competition from alternative health care or conventional housing
facilities in the private or public sector.
MUNICIPAL LEASES
The Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which is
issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. A trustee
is usually responsible for administering the terms of the participation and
enforcing the participants' rights in the underlying lease. Leases and
installment purchase or conditional sale contracts (which normally provide for
title to the leased assets to pass eventually to the government issuer) have
evolved as a means for government issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to these
arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Such arrangements are, therefore, subject to the risk that
the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of the Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal lease
obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease obligations
affecting the marketability thereof. These include the general creditworthiness
of the municipality, the importance of the property covered by the lease to the
municipality, and the likelihood that the marketability of the obligation will
be maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation, the
Investment Adviser will
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be responsible for determining the credit quality of such obligation on an
on-going basis, including an assessment of the likelihood that the lease may or
may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. Zero coupon bonds benefit
the issuer by mitigating its need for cash to meet debt service, but also
require a higher rate of return to attract investors who are willing to defer
receipt of such cash.
INSURANCE
Insured municipal obligations held by 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 municipal obligations. In evaluating
the credit quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the financial resources of the issuer (or, as appropriate, of the underlying
source of funds for debt service), its sensitivity to economic conditions and
trends, any operating history of and the community support for the facility
financed by the issue, the ability of the issuer's management and regulatory
matters. The Investment Adviser will attempt to reduce the risks of investing in
the lowest investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and attention
to current developments and trends in the economy and the financial markets.
See "Portfolio of Investments" in the "Financial Statements" incorporated by
reference into this SAI with respect to any defaulted obligations held by the
Portfolio.
SHORT-TERM TRADING
The Portfolio may sell (and later purchase) securities in anticipation of a
market decline (a rise in interest rates) or purchase (and later sell)
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment quality
of particular issues or the general movement of interest rates, such as changes
in the overall demand for or supply of various types of municipal obligations or
changes in the investment objectives of investors. Such trading may be expected
to increase the portfolio turnover rate, which may increase capital gains and
the expenses incurred in connection with such trading. The Portfolio cannot
accurately predict its portfolio turnover rate, but it is anticipated that the
annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less). A 100% annual
turnover rate would occur, for example, if all the securities held by 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. For the portfolio turnover rate of the Portfolio in prior fiscal
years, see "Supplementary Data" in "Financial Statements".
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-issued"
basis, that is, delivery and payment for the securities normally take place
within a specified number of days after the date of the Portfolio's
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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. 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 which are frequently secured by letters of credit or other
credit support arrangements provided by banks. To the extent that such letters
of credit or other arrangements constitute an unconditional guarantee of the
issuer's obligations, a bank may be treated as the issuer of a security for the
purpose of complying with the diversification requirements set forth in Section
5(b) of the 1940 Act and Rule 5b-2 thereunder. 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. Longer term fixed-rate bonds may give the holder a right to
request redemption at certain times (often annually after the lapse of an
intermediate term). These bonds are more defensive than conventional long term
bonds (protecting to some degree against a rise in interest rates) while
providing greater opportunity than comparable intermediate term bonds, because
the Portfolio may retain the bond if interest rates decline. By acquiring these
kinds of obligations 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. Because this right is assignable with the security, which is
readily marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
LIQUIDITY AND PROTECTIVE PUT OPTIONS
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
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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 or
demand features may not qualify as tax-exempt interest.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. The Portfolio
would have the right to call a loan and obtain the securities loaned at any time
on up to five business days' notice. During the existence of a loan, the
Portfolio will continue to receive the equivalent of the interest paid by the
issuer on the securities loaned and will also receive a fee, or all or a portion
of the interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. The Portfolio would not have the right
to vote any securities having voting rights during the existence of the loan,
but would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be of
good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, net of
administration expenses and any finder's fees, 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.
FUTURES CONTRACTS AND OPTIONS ON 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, the Portfolio may enter into (i)
futures contracts for the purchase or sale of debt securities and (ii) futures
contracts on securities indices. All futures contracts entered into by the
Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CTFC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States or foreign
exchange or board of trade. The Portfolio will be required, in connection with
transactions in futures contracts and the writing of options on futures, to make
margin deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in such
futures and options transactions.
Some futures contracts and options thereon may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit transactions in an exchange-traded instrument,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or futures option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
The Portfolio will engage in futures and related options transactions only
for bona fide hedging purposes as defined in or permitted by CFTC regulations.
The Portfolio will determine that the price fluctuations in the futures
contracts and options on futures are substantially related to price fluctuations
in securities held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a decline
in the price of securities that the Portfolio owns, or futures contracts will be
purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. The Portfolio will engage in transactions in
futures contracts and related options
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contracts only to the extent such transactions are consistent with the
requirements of the Code for maintaining the qualification of the Fund as a
regulated investment company for federal income tax purposes (see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or futures
contracts, or (2) cash or liquid securities (including municipal debt
obligations) with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily. Assets used as cover or held
in a segregated account cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
SHORT-TERM OBLIGATIONS
Although the Portfolio will normally attempt to invest substantially all of
its assets in municipal 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 federal income tax, and/or federal alternative
minimum tax. 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 obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund 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 SAI 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. Accordingly, 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 or (c) lending portfolio securities.
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Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all or part of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without approval by the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) engage in
options, futures or forward transactions if more than 5% of its net assets, as
measured by the aggregate of the premiums paid by the Fund or the Portfolio,
would be so invested; (b) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and unless not more than
25% of its net assets (taken at current value) is held as collateral for such
sales at any one time. (The Fund and the Portfolio will make such sales only for
the purpose of deferring realization of gain or loss for federal income tax
purposes); or (c) invest more than 15% of net assets in investments which are
not readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 and commercial paper
issued pursuant to Section 4(2) of said Act that the Board of Trustees of the
Trust or the Portfolio, or its delegate, determine to be liquid.
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 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
obligation.
Whenever an investment policy or investment restriction set forth in the
Prospectus or in this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change below investment grade made by a rating service, will not compel the Fund
or the Portfolio, as the case may be, to dispose of such security or other
asset. Notwithstanding the foregoing, the Fund and the Portfolio must always be
in compliance with the borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the 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 Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust, or the Portfolio, as defined in the 1940
Act, by virtue of their affiliation with BMR, Eaton Vance, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
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JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration, Soldiers
Field Road, Boston, Massachusetts 02134
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Former Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
THOMAS J. FETTER (53), President
Vice President of BMR, Eaton Vance and EV. Mr. Fetter was elected President of
the Trust and the Portfolio on December 13, 1993. Officer of various
investment companies managed by Eaton Vance or BMR.
WILLIAM H. AHERN, JR. (38), Vice President of the Portfolio
Vice President of BMR and Eaton Vance since January, 1996. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Portfolio on June 23, 1996.
ROBERT B. MACINTOSH (40), Vice President
Vice President of BMR since August 11, 1992 and of Eaton Vance and EV. Officer
of various investment companies managed by Eaton Vance or BMR. Mr. MacIntosh
was elected Vice President of the Trust and the Portfolio on March 22, 1993.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Secretary and Assistant Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March 27,
1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary on June 19,
1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
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The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees' Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the 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. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in the Fund's Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated October 13, 1992. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and
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long-term financial goals, your tolerance for investment risk, your investment
time frame, and other investments you may already own. Your professional
investment representatives are knowledgeable about financial markets, as well as
the wide range of investment opportunities available. A representative can
provide you with tailored financial advice and help you decide when to buy, sell
or persevere with your investments.
Eaton Vance offers single-state tax-free portfolios in more states than any
other sponsor of mutual funds. There are 32 long-term state portfolios, 5
national portfolios and 10 limited maturity portfolios, which serve as
investment vehicles for over 100 mutual funds with varying price options. A
staff of 32 (including 9 portfolio managers and 9 credit specialists) is
responsible for the day-to-day management of over 3,500 issues in 47 mutual fund
portfolios. Assets managed by the municipal investment group are currently over
$9.1 billion.
The following persons manage one or more of the Eaton Vance limited maturity
municipal portfolios. For the identity of the Portfolio's portfolio manager, see
the Fund's current Prospectus.
William H. Ahern, Jr. is a Vice President of Eaton Vance and BMR. Mr. Ahern
graduated from Boston College in 1981 with a B.A. in Economics, and received his
M.B.A. degree in Finance from Babson College in 1987. Mr. Ahern is a member of
the Boston Security Analysts Society.
Nicole Anderes is a Vice President of Eaton Vance and BMR. Ms. Anderes
graduated from Brown University with a B.A. in Women's Studies/Economics. She
has been an active member of MAGNY/National Federation of Municipal Analysts,
the Public Securities Association and the Municipal Forum, and served as the
General Secretary of MAGNY from 1992-1993.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
Cynthia J. Clemson is a Vice President of Eaton Vance and BMR. Ms. Clemson
graduated from Mount Holyoke College with a B.A. in 1985 and received her
M.B.A., cum laude, from Boston University in 1990. She is a member of the Boston
Municipal Analysts Forum, the Boston Securities Analyst Society and the
Financial Analysts Federation.
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
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litigation, proceedings and claims and any legal obligation of the Portfolio to
indemnify its Trustees, officers and investors with respect thereto, to the
extent not covered by insurance.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. As of March
31, 1997, the Portfolio had net assets of $102,503,516. For the fiscal years
ended March 31, 1997, 1996 and 1995, the Portfolio paid BMR advisory fees of
$575,268, $717,356 and $817,082, respectively, (equivalent to 0.48%, 0.47%, and
0.46% of the Portfolio's average daily net assets for such years).
The Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. 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. 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, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with 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 Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and Benjamin A.
Rowland, Jr. The Directors of EVC consist of the same persons and John G. L.
Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is vice chairman
and Mr. Hawkes is president and chief executive officer of EVC, BMR, Eaton Vance
and EV. All of the issued and outstanding shares of Eaton Vance and EV are owned
by EVC. All of the issued and outstanding shares of BMR are owned by Eaton
Vance. All shares of the outstanding Voting Common
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Stock of EVC are deposited in a Voting Trust which expires on December 31, 1997,
the Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or officers and Directors of EVC and EV. As of
July 31, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting
trust receipts, and Messrs. Rowland and Faust owned 15% and 13%, respectively,
of such voting trust receipts. Messrs. Dynner and Hawkes are officers or
Trustees of the Trust and the Portfolio and are members of the EVC, BMR, Eaton
Vance and EV organizations. Messrs. Ahern, Fetter, MacIntosh, Murphy, O'Connor
and Woodbury and Ms. Sanders are officers of the Trust and/or the Portfolio and
are also members of the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns 22% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all of the stock of Fulcrum Management, Inc. and MinVen, Inc., which are
engaged in precious metal mining venture investment and management. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the 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.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of other
entities in the Eaton Vance organization, owns approximately 13% of the voting
stock of Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Fund or the Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal, may require the
recognition of taxable gain or loss. Income dividends and capital gains
distributions in connection with withdrawal plan accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not have
a withdrawal plan in effect at the same time he or she has authorized Bank
Automated Investing or is otherwise
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making regular purchases of Fund shares. The shareholder, the Transfer Agent or
the Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of 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 municipal
obligations is a dealer market with no central trading location or continuous
quotation system, it is not feasible to obtain last transaction prices for most
municipal obligations held by the Portfolio, and such obligations, including
those purchased on a when-issued basis, will normally be valued on the basis of
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Taxable obligations for which price
quotations are readily available normally will be valued at the mean between the
latest available bid and asked prices. Open futures positions on debt securities
are valued at the most recent settlement prices, unless such price does not
reflect the fair value of the contract, in which case the positions will be
valued by or at the direction of the Trustees of the Portfolio. Other assets are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees of the Portfolio. The Fund and the Portfolio will be
closed for business and will not price their respective shares or interests on
the following business holidays: New Year's Day, President's Day, Good Friday,
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 Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interests
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, and either (i) the deduction of the
maximum initial sales charge from the initial $1,000 purchase order or (ii) a
complete redemption of the investment and, if applicable, the deduction of the
CDSC at the end of the period. For further information concerning the total
return of the Fund, see "Performance Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum initial sales
charge) per share on the last day of the period and annualizing the resulting
figure. Net investment income per share is calculated from the yields to
maturity of all debt obligations held by 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 distributions during the period. The yield figure does not
reflect the deduction of any CDSC which (if applicable) is imposed on certain
redemptions at the
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rate set forth under "How to Redeem Fund Shares" in the Fund's current
Prospectus. Yield calculations assume the current maximum sales charge (if
applicable) set forth under "How to Buy Fund Shares" in the Fund's current
Prospectus. (Actual yield may be affected by variations in sales charges on
investments.) A taxable-equivalent yield is computed by dividing the tax-exempt
yield by one minus a stated rate. For the yield and taxable-equivalent yield of
the Fund, see "Performance Information" in the Fund's Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or 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 or, where applicable, the
maximum public offering price per share (which includes the maximum initial
sales charge). The Fund's effective distribution rate is computed by dividing
the distribution rate by the ratio (the days in a year divided by the accrual
days of the monthly period) used to annualize the most recent monthly
distribution and reinvesting the resulting amount for a full year on the basis
of such ratio. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
Investors should note that the Fund's yield is calculated using a standardized
formula, the income component of which is computed from the yields to maturity
of all debt obligations held by the Portfolio based on prescribed methods (with
all purchases and sales of securities during such period included in the income
calculation on a settlement date basis), whereas the distribution rate is based
on the Fund's last monthly distribution which tends to be relatively stable and
may be more or less than the amount of net investment income and short-term
capital gain actually earned by the Fund during the month.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index, which may be used in advertisements and
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.
The Fund may provide investors with information on municipal bond investing,
which may include comparative performance information, evaluations of Fund
performance, ratings, charts and/or illustrations prepared by independent
sources, (such as Lipper Analytical Services, Inc., CDA/Wiesenberger,
Morningstar, Inc., The Bond Buyer, the Federal Reserve Board or The Wall Street
Journal). The Fund may also refer in investor publications to Tax Freedom Day,
as computed by the Tax Foundation, Washington, DC 20005, to help illustrate the
value of tax free investing, as well as other tax-related information.
Information, charts and illustrations showing the effects of inflation and taxes
(including their effect on the dollar and the return on various investments) and
compounding earnings may also be included in advertisements and materials
furnished to present and prospective investors.
Information about portfolio allocation and holdings of 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.
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. Such information may also compare the taxable
equivalent yield (or value) of the Fund to the after-tax yield (or value) of
such other investment vehicles. Such information may be in the form of
hypothetical illustrations. A bank certificate of deposit, unlike the Fund's
shares, pays a fixed rate of interest and entitles the depositor to receive the
face amount of the certificate of deposit at maturity. A bank money market
deposit account is a form of savings account which pays a variable rate of
interest. Unlike the Fund's shares, bank certificates of deposit and bank money
market deposit accounts are insured by the Federal Deposit Insurance
Corporation. A money market mutual fund is designed to maintain a constant value
of $1.00 per share and, thus, a money market fund's shares are subject to less
price fluctuation than the Fund's shares.
The average rates of return of money market mutual funds, certificates of
deposit and bank money market deposit accounts referred to in advertisements,
supplemental sales literature or communications of the Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
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Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in municipal bond
funds. Such information may describe the following advantages of investing in a
municipal bond mutual fund versus individual municipal bonds: regular monthly
income; free reinvestment of distributions; potential for increased income; bond
diversification; liquidity; low-cost easy access; and active management and in
depth credit analysis by investment professionals. In addition, by investing in
a municipal bond fund instead of individual bonds, an investor can avoid dealing
with the complexities of the municipal bond market, while benefitting from the
market access and lower transactions costs enjoyed by municipal bond funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its
ordinary income (including tax-exempt income) and net income (after reduction by
any available capital loss carryforwards) in accordance with the timing
requirements imposed by the Code, so as to maintain its RIC status and to avoid
paying any federal income or excise tax. The Fund so qualified for its fiscal
year ended March 31, 1997. Because the Fund invests its assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to also satisfy these
requirements. 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 RIC, the Fund
(i) will be deemed to own its proportionate share of each of the assets of the
Portfolio and (ii) will be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income (not including
tax-exempt income) for such year, at least 98% of its capital gain net income
(which is the excess of its realized capital gains over its realized capital
losses), generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards and (ii) 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that the Fund qualifies as a RIC
and the Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
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
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<PAGE>
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 securities that it might otherwise have continued to hold
in order to generate cash that the Fund may withdraw from the Portfolio to make
distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto. The
Code is not entirely clear regarding the federal income tax consequences of the
Fund's taking certain positions in connection with ownership of such distressed
securities. For example, the Code is unclear regarding: (i) when the Portfolio
may cease to accrue interest, original issue discount, or market discount; (ii)
when and to what extent deductions may be taken for bad debts or worthless
securities; (iii) how payments received on obligations in default should be
allocated between principal and income; and (iv) whether exchanges of debt
obligations in a workout context are taxable.
Distributions by 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 under Code Section
103(a). For purposes of applying this 50% requirement, the Fund will be deemed
to own its proportionate share of each of the assets of the Portfolio, and the
Portfolio currently intends to invest its assets in a manner such that the Fund
can meet this 50% requirement. Interest on certain municipal obligations is
treated as a tax preference item for purposes of the AMT. Shareholders of 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 discount with respect to certain stripped municipal obligations or
their stripped coupons, and certain realized gains or income attributable to
accrued market discount. Any distributions by the Fund of its share of such
capital gains (after reduction by any capital loss carryforwards) or taxable
income would be taxable to shareholders of the Fund. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to the
tax exempt interest earned by the Portfolio and allocated to the Fund. Certain
distributions of the Fund, if declared in October, November or December and paid
the following January, may be taxed to shareholders as if received on December
31 of the year in which they are declared.
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 periods of Portfolio securities,
and conversion of short-term capital losses 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 status.
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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 disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and, to
the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net
long-term capital gains with respect to such shares. In addition, a loss
realized on a redemption or other disposition of Fund shares may be disallowed
to the extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30 days
before the redemption of the loss shares and ending 30 days after such date.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax convention. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if (i) the
shareholder is engaged in a trade or business in the United States, (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions.
STATE, LOCAL AND FOREIGN TAXES
The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Shareholders of the Fund may be exempt from state and
local taxes on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in which they are
resident, but taxable generally on income derived from obligations of other
jurisdictions. The Fund will report annually to shareholders, with respect to
net tax exempt income earned, the percentage representing the proportionate
ratio of such income earned in each state.
Shareholders should consult their own tax advisers with respect to the
state, local and, where applicable, foreign tax consequences of investing in the
Fund.
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
19
<PAGE>
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, 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 compensation 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.
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<PAGE>
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 NASD, which rule provides that no firm which is
a member of the NASD shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Municipal obligations considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the Portfolio that the benefits available from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid
brokerage commissions of $61,353 and $11,212, respectively, on portfolio
security transactions aggregating approximately $477,279,677 and $102,185,731,
respectively, to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities). For the fiscal
year ended March 31, 1995, the Portfolio paid no brokerage commissions on
portfolio transactions.
OTHER INFORMATION
The Trust is organized as a Massachusetts business trust under a Declaration
of Trust dated October 23, 1985, as amended, and was originally called Eaton
Vance California Municipals Trust. The Trust changed its name to Eaton Vance
Investment Trust on April 28, 1992. Eaton Vance, pursuant to its agreement with
the Trust, controls the use of the words "Eaton Vance" and "EV" in the Fund's
name and may use the words "Eaton Vance" or "EV" in other connections and for
other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, 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
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<PAGE>
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
In accordance with the Declaration of Trust of 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 of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless removed
by action of the investors in accordance with the Portfolio's Declaration of
Trust, the Trustees shall continue to hold office and may appoint successor
Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
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
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented
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<PAGE>
to by all investors, agree to continue the business of the Portfolio. This
provision is consistent with treatment of the Portfolio as a partnership for
federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
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 Commission.
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolio listed below for the fiscal year ended March 31,
1997, as previously filed electronically with the Commission:
EV Classic National Limited Maturity Municipals Fund
National Limited Maturity Municipals Portfolio
(Accession No. 0000950109-97-004453)
EV Marathon National Limited Maturity Municipals Fund
National Limited Maturity Municipals Portfolio
(Accession No. 0000950109-97-004456)
EV Traditional National Limited Maturity Municipals Fund
National Limited Maturity Municipals Portfolio
(Accession No. 0000950109-97-004418)
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<PAGE>
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a taxable security must earn at
various income brackets to produce after-tax yields equivalent to those of
tax-exempt bonds yielding from 4% to 7% under the regular federal income tax
laws and tax rates applicable to 1997.
<TABLE>
<CAPTION>
JOINT RETURN MARGINAL TAX-EXEMPT YIELD
----------------- INCOME ------------------------------------------------------------------
SINGLE RETURN TAX
- ----------------- BRACKET
(TAXABLE INCOME)* 4% 4.5% 5% 5.5% 6% 6.5% 7%
- --------------------------------------- --------- ------------------------------------------------------------------
EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Up to $24,650 Up to $ 41,200 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 24,651-$ 59,750 $ 41,201-$ 99,600 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 59,751-$124,650 $ 99,601-$151,750 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$124,651-$271,050 $151,751-$271,050 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $271,050 Over $271,050 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- --------------------------------------- ------------------------------------------------------------------
</TABLE>
* Net amount subject to federal personal income tax after deductions and
exemptions.
Note: The above-indicated federal income tax brackets do not take into account
the effect of a reduction in the deductibility of itemized deductions for
taxpayers with adjusted gross income in excess of $121,200, nor the effects of
phaseout of personal exemptions for single and joint filers with adjusted gross
incomes in excess of $121,200 and $181,800, respectively. The effective tax
brackets and equivalent taxable yields of such taxpayers will be higher than
those indicated above.
Yields shown are for illustration purposes only and are not meant to represent
the Fund's actual yield. No assurance can be given that the Fund will achieve
any specific tax exempt yield. While it is expected that the Portfolio will
invest principally in obligations, the interest from which is exempt from the
regular federal income tax, other income received by the Portfolio and allocated
to the Fund may be taxable. This table does not take into account state or local
taxes, if any, payable on Fund distributions. It should also be noted that the
interest earned on certain "private activity bonds" issued after August 7, 1986,
while exempt from the regular federal income tax, is treated as a tax preference
item which could subject the recipient to or increase the recipient's liability
for the federal alternative minimum tax. The illustrations assume that the
federal alternative minimum tax is not applicable and do not take into account
any tax credits that may be available.
The information set forth above is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors should
consult their tax adviser for additional information.
24
<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.
- ---------------
+ 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.
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<PAGE>
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors effecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
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, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk 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.
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<PAGE>
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 that
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.
PROVISIONAL RATINGS: 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: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
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: Very strong or 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.
27
<PAGE>
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
obligor's 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+".
28
<PAGE>
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.
29
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC NATIONAL LIMITED MATURITY
MUNICIPALS FUND. The Fund changed its name from EV Classic National Limited
Maturity Tax Free Fund to EV Classic National Limited Maturity Municipals Fund
on December 8, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I, the
Administrator currently receives no compensation for providing administrative
services to the Fund. For the fiscal years ended March 31, 1996 and 1995,
$47,974 and $55,835, respectively, of the Fund's operating expenses were
allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $73,713 on sales of shares of the Fund.
During the same period, the Fund paid or accrued sales commissions under the
Plan aggregating $83,306 and the Principal Underwriter received approximately
$1,000 in CDSCs which were imposed on early redeeming shareholders. These
payments reduced uncovered distribution charges under the Plan. As at March 31,
1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $3,466,000.
During the fiscal year ended March 31, 1997, the Fund made service fee payments
to the Principal Underwriter and Authorized Firms aggregating $16,649 of which
$14,661 was paid to Authorized Firms and the balance of which was retained by
the Principal Underwriter.
PRINCIPAL UNDERWRITER
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 fiscal year ended March 31, 1997,
the Fund paid the Principal Underwriter $355.00 for repurchase transactions
handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, the noninterested
Trustees of the Trust and the Portfolio earned the
a-1
<PAGE>
following compensation in their capacities as Trustees from the Fund, the
Portfolio and the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---------------------------------------------- ------------ -------------- ------------------
<S> <C> <C> <C>
Donald R. Dwight.............................. $ 35 $1,557(2) $145,000(5)
Samuel L. Hayes, III.......................... 31 1,808(3) 155,000(6)
Norton H. Reamer.............................. 31 1,687 145,000
John L. Thorndike............................. 32 1,818(4) 148,750(7)
Jack L. Treynor............................... 35 1,796 150,000
</TABLE>
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
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 Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its 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 the noninterested
Trustees 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.
DISTRIBUTION PLAN
The Plan is designed to meet the requirements of Rule 12b-1 under the 1940
Act and the sales charge rule of the NASD. The purpose of the Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The 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 shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 6.25% of the
amount received by the Fund for each share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of uncovered distribution charges
(as described below) of the Principal Underwriter.
The amount payable by the 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 the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day by the Fund is limited to
1/365 of .75% of the Fund's net assets on such day. The level of the Fund's net
assets changes each day and depends upon the amount of sales and redemptions of
Fund shares, the changes in the value of the investments held by the Portfolio,
the expenses of the Fund and the
a-2
<PAGE>
Portfolio accrued and allocated to the Fund on such day, income on portfolio
investments of the Portfolio accrued and allocated to the Fund on such day, and
any dividends and distributions declared on Fund shares. The Fund does not
accrue possible future payments as a liability of the Fund or reduce the Fund's
current net assets in respect of unknown amounts which may become payable under
the Plan in the future because the standards for accrual of such a liability
under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges under the Fund's Plan.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund 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 Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions of Fund shares pursuant to
the exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level of
early redemptions of Fund shares resulting in the imposition of CDSCs will tend
to increase the time during which there will exist uncovered distribution
charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal .90% of the Fund's average daily net assets per annum.
For the actual payments made by the Fund and the outstanding uncovered
distribution charges of the Principal Underwriter, see "Fees and Expenses --
Distribution Plan" in this Part II. The Fund believes that the combined rate of
all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule 12b-1.
Although the Principal Underwriter will use its own funds (which may be borrowed
from banks) to pay sales commissions 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 sale
of Fund shares and through amounts paid to the Principal Underwriter, including
CDSCs, pursuant to the Plan. The Eaton Vance organization may be considered to
have realized a profit under the Plan if at any point in time the aggregate
amounts theretofore paid to the Principal Underwriter under the Plan, and from
CDSCs, have exceeded the total expenses theretofore incurred by such
organization in distributing 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.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
a-3
<PAGE>
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the Fund and the Trustees. So
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the 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 of the Trust have determined that in their judgment there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
a-4
<PAGE>
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 22, 1992 through March 31, 1997 and for the one-year period ended March
31, 1997. The total return for the period prior to the Fund's commencement of
operations on December 8, 1993 reflects the Portfolio's total return (or that of
its predecessor) adjusted to reflect any applicable Fund CDSC. Total return for
this time period has not been adjusted to reflect the Fund's distribution and/or
service fees and certain other expenses. If such adjustments were made, the
performance would have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF INVEST- VALUE OF INVEST-
MENT BEFORE MENT AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON ----------------------- -----------------------
PERIOD DATE INVESTMENT 3/31/97 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 5/22/92 $1,000 $ 1,245.93 $ 1,245.93 24.59% 4.63% 24.59% 4.63%
1 Year
Ended
3/31/97** 3/31/96 $1,000 $ 1,029.52 $ 1,019.52 2.95% 2.95% 1.95% 1.95%
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
- ---------------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
** If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.23%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.23% would be 6.13%, assuming a
federal tax rate of 31%.
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL was
the record owner of approximately 38.9% 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. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
a-5
<PAGE>
[LOGO]
EATON VANCE
===========
Mutual Funds
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
EV CLASSIC
NATIONAL LIMITED MATURITY MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110 C-LNASAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV MARATHON NATIONAL LIMITED
MATURITY MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon National Limited Maturity Municipals Fund
(the "Fund"), National Limited Maturity Municipals Portfolio (the "Portfolio")
and certain other series of Eaton Vance Investment Trust (the "Trust"). Part II
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional
Fund-specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS Page
PART I
<TABLE>
<S> <C>
Additional Information about Investment Policies.............................................. 2
Investment Restrictions....................................................................... 8
Trustees and Officers......................................................................... 10
Investment Adviser and Administrator.......................................................... 12
Custodian..................................................................................... 14
Service for Withdrawal........................................................................ 15
Determination of Net Asset Value.............................................................. 15
Investment Performance........................................................................ 16
Taxes......................................................................................... 18
Portfolio Security Transactions............................................................... 20
Other Information............................................................................. 22
Independent Certified Public Accountants...................................................... 23
Financial Statements.......................................................................... 23
Tax Equivalent Yield Table.................................................................... 24
Appendix...................................................................................... 25
PART II
Fees and Expenses............................................................................. a-1
Principal Underwriter......................................................................... a-2
Distribution Plan............................................................................. a-2
Performance Information....................................................................... a-4
Control Persons and Principal Holders of Securities........................................... a-4
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS 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).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR EV
MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND THE PART I FOUND IN THE
STATEMENT OF ADDITIONAL INFORMATION OF EV CLASSIC NATIONAL LIMITED MATURITY
MUNICIPALS FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON NATIONAL LIMITED
MATURITY MUNICIPALS FUND. The Fund changed its name from Eaton Vance National
Limited Maturity Tax Free Fund to EV Marathon National Limited Maturity Tax Free
Fund on January 11, 1994 and to EV Marathon National Limited Maturity Municipals
Fund on December 8, 1995.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $33,757 on sales of Class I shares of
the Fund. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $607,612 and the Principal Underwriter
received approximately $241,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at March 31, 1997, the outstanding uncovered distribution charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$542,000. During the fiscal year ended March 31, 1997, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating $133,657
for Class I shares and $10,522 for Class II shares, of which $132,950 and
$10,153, respectively was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
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 fiscal year ended March 31, 1997,
the Fund paid the Principal Underwriter $1,667.50 for repurchase transactions
handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
-------------------------------------------------------------- -------------- --------------------
<S> <C> <C> <C>
Donald R. Dwight $523 $ 1,557(2) $ 145,000(5)
Samuel L. Hayes, III 473 1,808(3) 155,000(6)
Norton H. Reamer 470 1,687 145,000
John L. Thorndike 484 1,818(4) 148,750(7)
Jack L. Treynor 519 1,796 150,000
</TABLE>
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
a-1
<PAGE>
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 Authorized Firms or investors and other selling
literature and of advertising are borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its 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 the noninterested
Trustees 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.
DISTRIBUTION PLAN
The Plan applicable to Class I shares is designed to meet the requirements
of Rule 12b-1 under the 1940 Act and the sales charge rule of the NASD. The
purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund.
The Plan provides that the Fund 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 Fund shares (excluding reinvestment
of distributions) the Fund will pay the Principal Underwriter amounts
representing (i) sales commissions equal to 3% of the amount received by the
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 amount payable by the 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 shares and will accordingly reduce
the net assets of the Class I shares upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day by the
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 the 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 held by the
Portfolio, the expenses of the Fund attributable to Class I shares and the
Portfolio accrued and allocated to the Fund on such day, income on portfolio
investments of the Portfolio accrued and allocated to the Fund on such day, and
any dividends and distributions declared on the Class I shares. The Fund does
not accrue possible future payments as a liability of the Class I shares or
reduce the current net assets of the Class I shares in respect of unknown
amounts which may become payable under the Plan in the future because the
standards for accrual of such a liability under accounting principles have not
been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund on behalf of Class I shares to the Principal
Underwriter and CDSCs 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
a-2
<PAGE>
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 CDSC will be imposed, the level and timing of redemptions of Class I
shares upon which no CDSC will be imposed (including redemptions of Class I
shares pursuant to the exchange privilege 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. 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 CDSCs will tend to increase the time
during which there will exist uncovered distribution charges of the Principal
Underwriter.
Currently payments of sales commissions and distribution fees and of service
fees may equal .90% of the Fund's average daily net assets per annum. For actual
payments made by the Fund and the outstanding uncovered distribution charges of
the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in this
Part II. The Fund believes that the combined rate of all these payments may be
higher than the rate of payments made under distribution plans adopted by many
other investment companies pursuant to Rule 12b-1. Although the Principal
Underwriter will use its own funds (which may be borrowed from banks) to pay
sales commissions at the time of sale, it is anticipated that the Eaton Vance
organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from the sale of Class I shares and through
amounts paid to the Principal Underwriter, including CDSCs, pursuant to the
Plan. The Eaton Vance organization may be considered to have realized a profit
under the Plan if at any point in time the aggregate amounts theretofore
received by the Principal Underwriter pursuant to the Plan and from CDSCs have
exceeded the total expenses theretofore incurred by such organization in
distributing Class 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.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time with respect to one or more classes of
shares of the Fund by a vote of a majority of the Rule 12b-1 Trustees or by a
vote of a majority of the outstanding voting securities of that class of the
Fund. The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the affected class of the Fund
and the Trustees. So long as the Plan is in effect, the selection and nomination
of the noninterested Trustees shall be committed to the discretion of such
Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the 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
a-3
<PAGE>
in the maintenance of, and possible future growth in, the assets of the Fund.
Based on the foregoing and other relevant factors, the Trustees of the Trust
have determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the life of the Fund
from May 22, 1992 through March 31, 1997 and for the one-year period ended March
31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF INVEST- VALUE OF INVEST-
MENT BEFORE MENT AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC***
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC*** ON ----------------------- -----------------------
PERIOD DATE INVESTMENT 3/31/97 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 5/22/92 * $1,000 $ 1,255.25 $ 1,255.25 25.52% 4.79% 25.52% 4.79%
1 Year
Ended
3/31/97 3/31/96 $1,000 $ 1,033.04 $ 1,003.34 3.30% 3.30% 0.33% 0.33%
</TABLE>
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.
- ---------------
*Investment operations began on May 22, 1992.
**If a portion of the Portfolio's and/or the Fund's expenses had not been
subsidized, the Fund would have had lower returns.
***No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.12%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.12% would be 5.97%, assuming a
federal tax rate of 31%.
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL was the
record owner of approximately 14.3% and 28.2%, respectively, of the outstanding
Class I and Class II shares which are held on behalf of its customers who are
the beneficial owners of such shares, and as to which it has voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more the Fund's outstanding shares as of
such date.
a-4
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
EATON VANCE
===========
Mutual Funds
- --------------------------------------------------------------------------------
EV MARATHON
NATIONAL LIMITED MATURITY
MUNICIPALS FUND
STATEMENT OF
ADDITIONAL INFORMATION
AUGUST 1, 1997
EV MARATHON NATIONAL LIMITED MATURITY
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110 M-LNASAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV TRADITIONAL NATIONAL LIMITED
MATURITY MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about EV Traditional National Limited Maturity
Municipals Fund (the "Fund"), National Limited Maturity Municipals Portfolio
(the "Portfolio") and certain other series of Eaton Vance Investment Trust (the
"Trust"). Part II provides information solely about the Fund. Where appropriate,
Part I includes cross-references to the relevant sections of Part II, that
provide additional Fund-specific information. This Statement of Additional
Information is sometimes referred to herein as the "SAI."
TABLE OF CONTENTS Page
PART I
<TABLE>
<S> <C>
Additional Information about Investment Policies.............................................. 2
Investment Restrictions....................................................................... 8
Trustees and Officers......................................................................... 9
Investment Adviser and Administrator.......................................................... 11
Custodian..................................................................................... 14
Service for Withdrawal........................................................................ 14
Determination of Net Asset Value.............................................................. 15
Investment Performance........................................................................ 15
Taxes......................................................................................... 17
Portfolio Security Transactions............................................................... 19
Other Information............................................................................. 21
Independent Certified Public Accountants...................................................... 23
Financial Statements.......................................................................... 23
Tax Equivalent Yield Table.................................................................... 24
Appendix...................................................................................... 25
PART II
Fees and Expenses............................................................................. a-1
Services for Accumulation..................................................................... a-2
Principal Underwriter......................................................................... a-2
Service Plan.................................................................................. a-3
Performance Information....................................................................... a-4
Control Persons and Principal Holders of Securities........................................... a-4
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS 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).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR EV
TRADITIONAL NATIONAL LIMITED MATURITY MUNICIPALS FUND THE PART I FOUND IN THE
STATEMENT OF ADDITIONAL INFORMATION OF EV CLASSIC NATIONAL LIMITED MATURITY
MUNICIPALS FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL NATIONAL LIMITED
MATURITY MUNICIPALS FUND. The Fund changed its name from EV Traditional National
Limited Maturity Tax Free Fund to EV Traditional National Limited Maturity
Municipals Fund on December 8, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator currently receives no
compensation for providing administrative services to the Fund. For the fiscal
years ended March 31, 1997 and 1996 and for the period from the start of
business, June 3, 1994, to March 31, 1995, $21,316, $54,321 and $33,570,
respectively, of the Fund's operating expenses were allocated to the
Administrator.
SERVICE PLAN
During the fiscal year ended March 31, 1997, the Fund made service fee
payments under the Plan aggregating $5,843 of which $3,632 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of shares of the Fund
for the fiscal year ended March 31, 1997 was $9,555, of which $204 was received
by the Principal Underwriter and $9,351 was received by Authorized Firms. The
total sales charges paid in connection with sales of shares of the Fund for the
fiscal year ended March 31, 1996 and for the period from the start of business,
June 3, 1994, to March 31, 1995, were $22,571 and $8,585, respectively. All of
such amounts were paid to Authorized Firms.
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 fiscal year ended March 31, 1997,
the Fund paid the Principal Underwriter $355.00 for repurchase transactions
handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio 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, 1997, 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 funds in the
Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION FROM FROM TRUST AND
NAME FROM FUND PORTFOLIO FUND COMPLEX
--------------------------------------------------- ------------ ------------ ------------------
<S> <C> <C> <C>
Donald R. Dwight................................... $ 35 $1,557(2) $145,000(5)
Samuel L. Hayes, III............................... 31 1,808(3) 155,000(6)
Norton H. Reamer................................... 31 1,687 145,000
John L. Thorndike.................................. 32 1,818(4) 148,750(7)
Jack L. Treynor.................................... 35 1,796 150,000
</TABLE>
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $686 of deferred compensation.
(3) Includes $312 of deferred compensation.
(4) Includes $917 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
a-1
<PAGE>
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge other than the
sales charge included in the offering price, and may be changed or discontinued
without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is
anticipated that $100,000 or more of Fund shares and shares of the other
continuously offered open-end funds listed under "The Eaton Vance Exchange
Privilege" in the current Prospectus of the Fund will be purchased within a
13-month period, a Statement of Intention should be signed so that shares may be
obtained at the same reduced sales charge as though the total quantity were
invested in one lump sum. Shares held under Right of Accumulation (see below) as
of the date of the Statement will be included toward the completion of the
Statement. The Statement authorizes the Transfer Agent to hold in escrow
sufficient shares (5% of the dollar amount specified in the Statement) which can
be redeemed to make up any difference in sales charge on the amount intended to
be invested and the amount actually invested. Execution of a Statement does not
obligate the shareholder to purchase or the Fund to sell the full amount
indicated in the Statement, and should the amount actually purchased during the
13-month period be more or less than that indicated on the Statement, price
adjustments will be made. Any investor considering signing a Statement of
Intention should read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the fund for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate amount. Shares purchased (i) by an
individual, his or her spouse and their children under the age of twenty-one,
and (ii) by a trustee, guardian or other fiduciary of a single trust estate or a
single fiduciary account, will be combined for the purpose of determining
whether a purchase will qualify for the Right of Accumulation and if qualifying,
the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund Shares").
Such table is applicable to purchases of the Fund alone or in combination with
purchases of certain other funds offered by the Principal Underwriter, made at a
single time by (i) an individual, or an individual, his or her spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account; and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days
a-2
<PAGE>
of such purchase); or (2) purchases of the Fund pursuant to the Right of
Accumulation and declared as such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company. Shares may also be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Shares of
the Fund may also be sold at net asset value to registered representatives and
employees of certain Authorized Firms and to such persons' spouses and children
under the age of 21 and their beneficial account.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne by
the Principal Underwriter. The fees and expenses of qualifying and registering
and maintaining qualifications and registrations of the Fund and its shares
under federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of the noninterested Trustees), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment. The
Principal Underwriter distributes 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
Principal Underwriter may allow, upon notice to all Authorized Firms with whom
it has agreements, discounts up to the full sales charge during the periods
specified in the notice. During periods when the discount includes the full
sales charge, such Authorized Firms may be deemed to be underwriters as that
term is defined in the Securities Act of 1933. See "Fees and Expenses" in this
Part II for the sales charge paid to the Principal Underwriter.
See the Statement of Assets and Liabilities in the Fund's Financial
Statements in this Part II for a specimen price make-up sheet showing the
computation of maximum offering price per share as at March 31, 1997.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the sales charge rule of the
NASD. (Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if the Rule were applicable.) The following supplements the
discussion of the Plan contained in the Fund's Prospectus.
The Plan continues in effect from year to year, for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Plan Trustees")
and (ii) all of the Trustees then in office, cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan. The Plan may be
terminated at any time by vote of the Plan Trustees or by a vote of a majority
of the outstanding voting securities of the Fund.
Under the Plan, requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments described
herein without approval of the shareholders of the Fund, and the Trustees. So
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees. The Trustees
have determined that in their judgment there is a reasonable likelihood that the
Plan
a-3
<PAGE>
will benefit the Fund and its shareholders. For the service fees paid under the
Plan, see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from May 22, 1992 through March
31, 1997 and for the one-year period ended March 31, 1997. The total return for
the period prior to the Fund's commencement of operations on June 3, 1994
reflects the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge. Total return for this time period has
not been adjusted to reflect the Fund's distribution and/or service fees and
certain other expenses. If such adjustments were made, the performance would
have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- --------------------------
PERIOD DATE INVESTMENT* ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ----------- ---------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/22/92 $ 977.56 $1,254.72 28.35% 5.27% 25.47% 4.78%
1 Year Ended**
03/31/97 3/31/96 $ 977.42 $1,016.66 4.02% 4.02% 1.67% 1.67%
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
- ---------------
* Initial investment less the applicable maximum sales charge of 2.25%.
** If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
For the thirty-day period ended March 31, 1997, the yield of the Fund was
4.52%. The yield required of a taxable security that would produce an after-tax
yield equivalent to that earned by the Fund of 4.52% would be 6.55%, assuming a
federal tax rate of 31%. If a portion of the Fund's expenses had not been
allocated to the Administrator, the Fund would have had a lower yield.
See the Tax Equivalent Yield Table in Part I for information concerning
applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1997, 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
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Jacksonville, FL and Mars
& Co., Boston, MA were the record owners of approximately 15.8% and 44.5%,
respectively, of the outstanding shares, which they held on behalf of their
customers who are the beneficial owners of such shares, and as to which they 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: Michigan National Bank, FBO Robert J.
Phelps, Farmington Hills, MI (13.9%). To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
shares as of such date.
a-4
<PAGE>
[LOGO]
EATON VANCE
EV TRADITIONAL ==============
Mutual Funds
NATIONAL LIMITED MATURITY
MUNICIPALS FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
EV TRADITIONAL NATIONAL LIMITED MATURITY
MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-LNASAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A ARE "FINANCIAL HIGHLIGHTS" FOR THE FOLLOWING FUNDS FOR FISCAL PERIODS
FROM THE START OF BUSINESS TO MARCH 31, 1997:
For EV Classic Florida Limited Maturity Municipals Fund (start of business, December 8,
1993).
For EV Classic Massachusetts Limited Maturity Municipals Fund (start of business, December
9, 1993).
For EV Classic New York Limited Maturity Municipals Fund (start of business, December 8,
1993).
For EV Classic Pennsylvania Limited Maturity Municipals Fund (start of business, December
8, 1993).
For EV Classic National Limited Maturity Municipals Fund (start of business, December 8,
1993).
For EV Marathon California Limited Maturity Municipals Fund (start of business May 29,
1992).
For EV Marathon Connecticut Limited Maturity Municipals Fund (start of business April 16,
1993).
For EV Marathon Florida Limited Maturity Municipals Fund (start of business May 29, 1992).
For EV Marathon Massachusetts Limited Maturity Municipals Fund (start of business June 1,
1992).
For EV Marathon Michigan Limited Maturity Municipals Fund (start of business April 16,
1993).
For EV Marathon New Jersey Limited Maturity Municipals Fund (start of business June 1,
1992).
For EV Marathon New York Limited Maturity Municipals Fund (start of business May 29,
1992).
For EV Marathon Ohio Limited Maturity Municipals Fund (start of business April 16, 1993).
For EV Marathon Pennsylvania Limited Maturity Municipals Fund (start of business June 1,
1992).
For EV Marathon National Limited Maturity Municipals Fund (start of business May 22,
1992).
For EV Traditional California Limited Maturity Municipals Fund (start of business,
December 8, 1993).
For EV Traditional Connecticut Limited Maturity Municipals Fund (start of business,
December 27, 1993).
For EV Traditional Florida Limited Maturity Municipals Fund (start of business, July 5,
1994).
For EV Traditional Michigan Limited Maturity Municipals Fund (start of business, December
8, 1993).
For EV Traditional New Jersey Limited Maturity Municipals Fund (start of business,
December 8, 1993).
For EV Traditional New York Limited Maturity Municipals Fund (start of business, July 6,
1994).
For EV Traditional Ohio Limited Maturity Municipals Fund (start of business, December 8,
1993).
For EV Traditional National Limited Maturity Municipals Fund (start of business, June 3,
1994).
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS CONTAINED IN THE ANNUAL
REPORTS FOR THE FOLLOWING FUNDS, EACH DATED MARCH 31, 1997 (WHICH WERE PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
(Accession No. 0000950156-97-000909)
EV Marathon California Limited Maturity Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
(Accession No. 0000950156-97-000905)
EV Traditional California Limited Maturity Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
(Accession No. 0000950156-97-000902)
EV Classic National Limited Maturity Municipals Fund
(Accession No. 0000950109-97-004453)
EV Marathon National Limited Maturity Municipals Fund
(Accession No. 0000950109-97-004456)
EV Traditional National Limited Maturity Municipals Fund
(Accession No. 0000950109-97-004418)
The Financial Statements contained in each Fund's Annual Report include:
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL STATEMENTS OF
CALIFORNIA LIMITED MATURITY MUNICIPALS PORTFOLIO, CONNECTICUT LIMITED MATURITY MUNICIPALS
PORTFOLIO, FLORIDA LIMITED MATURITY MUNICIPALS PORTFOLIO, MASSACHUSETTS LIMITED MATURITY
MUNICIPALS PORTFOLIO, MICHIGAN LIMITED MATURITY MUNICIPALS PORTFOLIO, NATIONAL LIMITED
MATURITY MUNICIPALS PORTFOLIO, NEW JERSEY LIMITED MATURITY MUNICIPALS PORTFOLIO, NEW YORK
LIMITED MATURITY MUNICIPALS PORTFOLIO, OHIO LIMITED MATURITY MUNICIPALS PORTFOLIO AND
PENNSYLVANIA LIMITED MATURITY MUNICIPALS PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL REPORTS
DATED MARCH 31, 1997 OF THE CORRESPONDING FUNDS:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report
(b) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust for Eaton Vance Investment Trust dated January
11, 1993 filed as Exhibit 1(a) to Post-Effective Amendment No. 34 and incorporated
herein by reference.
(b) Amendment and Restatement of Establishment and Designation of Series dated June 19, 1995
filed as Exhibit 1(b) to Post-Effective Amendment No. 34 and incorporated herein by
reference.
(c) Establishment and Designation of Classes dated March 18, 1996 filed as Exhibit (1)(c) to
Post-Effective Amendment No. 35 and incorporated herein by reference.
(2)(a) By-Laws as amended March 30, 1992, filed as Exhibit 2(a) to Post-Effective Amendment No.
34 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. 34 and incorporated herein by reference.
(3) Not applicable.
(4) Not applicable.
(5) Not applicable.
(6)(a)(1) Distribution Agreement between Registrant (on behalf of its Classic series) and Eaton
Vance Distributors, Inc. dated November 1, 1996 filed as Exhibit (6)(a)(1) to Post-
Effective Amendment No. 37 and incorporated herein by reference.
(2) Distribution Agreement between Registrant (on behalf of its Marathon series) and Eaton
Vance Distributors, Inc. dated November 1, 1996 filed as Exhibit (6)(a)(2) to Post-
Effective Amendment No. 37 and incorporated herein by reference.
(3) Distribution Agreement between Registrant (on behalf of its Traditional series) and
Eaton Vance Distributors, Inc. dated November 1, 1996 filed as Exhibit (6)(a)(3) to
Post-Effective Amendment No. 37 and incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized Dealers
filed as Exhibit (6)(b) to the Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the Registrant an exemptive order
that permits the Registrant to enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange Fund, Inc., Release No.
IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated April 15, 1994 filed as
Exhibit (8) to Post-Effective Amendment No. 34 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October 23,
1995 filed as Exhibit (8)(b) to Post-Effective Amendment No. 35 and incorporated herein
by reference.
(9) Amended Administrative Services Agreement between Eaton Vance Investment Trust (on
behalf of each of its series) and Eaton Vance Management dated June 19, 1995, with
attached schedule under Rule 8b-31 under the Investment Company Act of 1940, as amended,
regarding each series of the Registrant filed as Exhibit (9) to Post-Effective Amendment
No. 34 and incorporated herein by reference.
(10) Opinion of counsel filed herewith.
(11)(a) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV Classic
Florida Limited Maturity Municipals Fund, EV Classic Massachusetts Limited Maturity
Municipals Fund, EV Classic New York Limited Maturity Municipals Fund and EV Classic
Pennsylvania Limited Maturity Municipals Fund dated July 21, 1997 filed herewith.
(b) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV Marathon
California Limited Maturity Municipals Fund, EV Marathon Connecticut Limited Maturity
Municipals Fund, EV Marathon Florida Limited Maturity Municipals Fund, EV Marathon
Massachusetts Limited Maturity Municipals Fund, EV Marathon Michigan Limited Maturity
Municipals Fund, EV Marathon New Jersey Limited Maturity Municipals Fund, EV Marathon
New York Limited Maturity Municipals Fund, EV Marathon Ohio Limited Maturity Municipals
Fund and EV Marathon Pennsylvania Limited Maturity Municipals Fund dated July 21, 1997
filed herewith.
(c) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV
Traditional California Limited Maturity Municipals Fund, EV Traditional Connecticut
Limited Maturity Municipals Fund, EV Traditional Florida Limited Maturity Municipals
Fund, EV Traditional Michigan Limited Maturity Municipals Fund, EV Traditional New
Jersey Limited Maturity Municipals Fund, EV Traditional New York Limited Maturity
Municipals Fund and EV Traditional Ohio Limited Maturity Municipals Fund dated July 21,
1997 filed herewith.
(d) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV Classic
National Limited Maturity Municipals Fund dated July 21, 1997 filed herewith.
(e) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV Marathon
National Limited Maturity Municipals Fund dated July 21, 1997 filed herewith.
(f) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf of EV
Traditional National Limited Maturity Municipals Fund dated July 21, 1997 filed
herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15)(a) Amended Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, for Eaton Vance Investment Trust (on behalf of its Classic series)
dated January 27, 1995, with attached schedule pursuant to Rule 8b-31 under the
Investment Company Act of 1940, as amended, regarding other Classic series of the
Registrant filed as Exhibit (15)(a) to Post-Effective Amendment No. 34 and incorporated
herein by reference.
(1) Amendment dated November 1, 1996 to the Amended Distribution Plan filed as Exhibit
(15)(a) to Post-Effective Amendment No. 37 and incorporated herein by reference.
(b) Amended Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, for Eaton Vance Investment Trust (on behalf of its Marathon series)
dated June 19, 1995, with attached schedule pursuant to Rule 8b-31 under the Investment
Company Act of 1940, as amended, regarding other Marathon series of the Registrant filed
as Exhibit (15)(b) to Post-Effective Amendment No. 34 and incorporated herein by
reference.
(1) Amendment dated November 1, 1996 to the Amended Distribution Plan filed as Exhibit
(15)(b) to Post-Effective Amendment No. 37 and incorporated herein by reference.
(c) Amended Service Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended, for Eaton Vance Investment Trust (on behalf of its Traditional series) dated
June 19, 1995, with attached schedule pursuant to Rule 8b-31 under the Investment
Company Act of 1940, as amended, regarding other Traditional series of the Registrant
filed as Exhibit (15)(c) to Post-Effective Amendment No. 34 and incorporated herein by
reference.
(1) Amendment dated November 1, 1996 to the Amended Service Plan filed as Exhibit (15)(c) to
Post-Effective Amendment No. 37 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 April 22, 1997 filed herewith.
(b) Power of Attorney for California Limited Maturity Municipals Portfolio, Connecticut
Limited Maturity Municipals Portfolio, Florida Limited Maturity Municipals Portfolio,
Massachusetts Limited Maturity Municipals Portfolio, Michigan Limited Maturity
Municipals Portfolio, National Limited Maturity Municipals Portfolio, New Jersey Limited
Maturity Municipals Portfolio, New York Limited Maturity Municipals Portfolio, Ohio
Limited Maturity Municipals Portfolio and Pennsylvania Limited Maturity Municipals
Portfolio dated April 22, 1997 filed herewith.
(18) Multi-Class Plan for Eaton Vance Investment Trust dated March 18, 1996 filed as Exhibit
(18) to Post-Effective Amendment No. 35 and incorporated herein by reference.
</TABLE>
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 June 30, 1997
----------------------------------------------- ------------------------
<S> <C>
EV Classic Florida Limited Maturity Municipals Fund 76
EV Classic Massachusetts Limited Maturity Municipals Fund 58
EV Classic National Limited Maturity Municipals Fund 236
EV Classic New York Limited Maturity Municipals Fund 77
EV Classic Pennsylvania Limited Maturity Municipals Fund 100
EV Marathon California Limited Maturity Municipals Fund -- Class I 448
EV Marathon California Limited Maturity Municipals Fund -- Class II 455
EV Marathon Connecticut Limited Maturity Municipals Fund -- Class I 203
EV Marathon Connecticut Limited Maturity Municipals Fund -- Class II 76
EV Marathon Florida Limited Maturity Municipals Fund -- Class I 778
EV Marathon Florida Limited Maturity Municipals Fund -- Class II 1,049
EV Marathon Massachusetts Limited Maturity Municipals Fund -- Class I 1,010
EV Marathon Massachusetts Limited Maturity Municipals Fund -- Class II 1,048
EV Marathon Michigan Limited Maturity Municipals Fund -- Class I 312
EV Marathon Michigan Limited Maturity Municipals Fund -- Class II 148
EV Marathon National Limited Maturity Municipals Fund -- Class I 903
EV Marathon National Limited Maturity Municipals Fund -- Class II 1,063
EV Marathon New Jersey Limited Maturity Municipals Fund -- Class I 917
EV Marathon New Jersey Limited Maturity Municipals Fund -- Class II 976
EV Marathon New York Limited Maturity Municipals Fund -- Class I 1,288
EV Marathon New York Limited Maturity Municipals Fund -- Class II 1,453
EV Marathon Ohio Limited Maturity Municipals Fund -- Class I 452
EV Marathon Ohio Limited Maturity Municipals Fund -- Class II 201
EV Marathon Pennsylvania Limited Maturity Municipals Fund -- Class I 964
EV Marathon Pennsylvania Limited Maturity Municipals Fund -- Class II 1,075
EV Traditional California Limited Maturity Municipals Fund 50
EV Traditional Connecticut Limited Maturity Municipals Fund 26
EV Traditional Florida Limited Maturity Municipals Fund 21
EV Traditional Michigan Limited Maturity Municipals Fund 42
EV Traditional National Limited Maturity Municipals Fund 27
EV Traditional New Jersey Limited Maturity Municipals Fund 43
EV Traditional New York Limited Maturity Municipals Fund 18
EV Traditional Ohio Limited Maturity Municipals Fund 44
</TABLE>
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust, dated
January 11, 1993, permits Trustee and officer indemnification by By-law,
contract and vote. Article XI of the By-laws contains indemnification
provisions. Registrant's Trustees and officers are insured under a standard
mutual fund errors and omissions insurance policy covering insured by reason
of negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the Statement of Additional
Information, which information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<S> <C>
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust II EV Traditional Worldwide Health Sciences
Eaton Vance Municipal Bond Fund L.P. Fund, Inc.
</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
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk None
George D. Owen II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and None
Director
Stephen M. Rudman Vice President None
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
- ----------
</TABLE>
*Address is 24 Federal Street, Boston, MA 02110
(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, 600 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116 and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody 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 certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Boston, and the Commonwealth of Massachusetts, on the 21st day of July,
1997.
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
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
--------------------------------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
California Limited Maturity Municipals 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 July, 1997.
CALIFORNIA LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
--------------------------------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Connecticut Limited Maturity Municipals 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 July, 1997.
CONNECTICUT LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
--------------------------------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Florida Limited Maturity Municipals 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 July, 1997.
FLORIDA LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Massachusetts Limited Maturity Municipals 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 July, 1997.
MASSACHUSETTS LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Michigan Limited Maturity Municipals 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 July, 1997.
MICHIGAN LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
New Jersey Limited Maturity Municipals 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 July, 1997.
NEW JERSEY LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
New York Limited Maturity Municipals 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 July, 1997.
NEW YORK LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Ohio Limited Maturity Municipals 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 July, 1997.
OHIO LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Pennsylvania Limited Maturity Municipals 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 July, 1997.
PENNSYLVANIA LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
National Limited Maturity Municipals 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 July, 1997.
NATIONAL LIMITED MATURITY
MUNICIPALS 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President (Chief
/s/ THOMAS J. FETTER Executive Officer) July 21, 1997
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ERIC G. WOODBURY
---------------------------------
ERIC G. WOODBURY
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>
(10) Opinion of Counsel.
(11)(a) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Classic Florida Limited Maturity Municipals Fund, EV Classic
Massachusetts Limited Maturity Municipals Fund, EV Classic New York
Limited Maturity Municipals Fund and EV Classic Pennsylvania Limited
Maturity Municipals Fund dated July 21, 1997.
(b) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Marathon California Limited Maturity Municipals Fund, EV Marathon
Connecticut Limited Maturity Municipals Fund, EV Marathon Florida Limited
Maturity Municipals Fund, EV Marathon Massachusetts Limited Maturity
Municipals Fund, EV Marathon Michigan Limited Maturity Municipals Fund,
EV Marathon New Jersey Limited Maturity Municipals Fund, EV Marathon New
York Limited Maturity Municipals Fund, EV Marathon Ohio Limited Maturity
Municipals Fund and EV Marathon Pennsylvania Limited Maturity Municipals
Fund dated July 21, 1997.
(c) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Traditional California Limited Maturity Municipals Fund, EV
Traditional Connecticut Limited Maturity Municipals Fund, EV Traditional
Florida Limited Maturity Municipals Fund, EV Traditional Michigan Limited
Maturity Municipals Fund, EV Traditional New Jersey Limited Maturity
Municipals Fund, EV Traditional New York Limited Maturity Municipals Fund
and EV Traditional Ohio Limited Maturity Municipals Fund dated July 21,
1997.
(d) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Classic National Limited Maturity Municipals Fund dated July 21,
1997.
(e) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Marathon National Limited Maturity Municipals Fund dated July 21,
1997.
(f) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of EV Traditional National Limited Maturity Municipals Fund dated July
21, 1997.
(16) Schedules for Computation of Performance Quotations.
(17)(a) Power of Attorney for Eaton Vance Investment Trust dated April 22, 1997.
(b) Power of Attorney for California Limited Maturity Municipals Portfolio,
Connecticut Limited Maturity Municipals Portfolio, Florida Limited
Maturity Municipals Portfolio, Massachusetts Limited Maturity Municipals
Portfolio, Michigan Limited Maturity Municipals Portfolio, National
Limited Maturity Municipals Portfolio, New Jersey Limited Maturity
Municipals Portfolio, New York Limited Maturity Municipals Portfolio,
Ohio Limited Maturity Municipals Portfolio and Pennsylvania Limited
Maturity Municipals Portfolio dated April 22, 1997.
</TABLE>
<PAGE>
EXHIBIT 10
EATON VANCE MANAGEMENT
24 Federal Street
Boston, MA 02110
(617) 482-8260
July 23, 1997
Eaton Vance Investment Trust
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Investment Trust (the "Trust") is a Massachusetts business
trust created under a Declaration of Trust dated October 23, 1985 executed and
delivered in Boston, Massachusetts and currently operating under an Amended and
Restated Declaration of Trust dated January 11, 1993 (the "Declaration of
Trust"). I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the interest of shareholders is divided
into shares of beneficial interest without par value, and the number of shares
that may be issued is unlimited. The Trustees may from time to time issue and
sell or cause to be issued and sold shares for cash or for property. All such
shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes duly adopted, the Trustees of the Trust have authorized the
issuance of shares of beneficial interest, without par value. The Trust intends
to register under the Securities Act of 1933, as amended, 19,751,966 of its
shares of beneficial interest with Post-Effective Amendment No. 38 to its
Registration Statement on Form N-1A (the "Amendment") with the securities and
Exchange Commission.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purpose of this opinion, including the
Declaration of Trust and votes adopted by the Trustees. Based upon the
foregoing, and with respect to Massachusetts law (other than the Massachusetts
Uniform Securities Act), only to the extent that Massachusetts law may be
applicable and without reference to the laws of the other several states or of
the United States of America, I am of the opinion that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
2. Shares of beneficial interest registered by the Amendment may be
legally and validly issued in accordance with the Declaration of Trust upon
receipt by the Trust of payment in compliance with the Declaration of Trust and,
when so issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts bar, and I hereby consent to the
filing of this opinion with the Securities and Exchange Commission as an exhibit
hereto.
Very truly yours,
/s/ Eric G. Woodbury
--------------------------------------
Eric G. Woodbury
Vice President, Eaton Vance Management
<PAGE>
EXHIBIT 11(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Classic Florida Limited Maturity Municipals Fund, EV
Classic Massachusetts Limited Maturity Municipals Fund, EV Classic New York
Limited Maturity Municipals Fund and EV Classic Pennsylvania Limited Maturity
Municipals Fund of our report dated May 2, 1997, relating to EV Classic
Florida Limited Maturity Municipals Fund, EV Classic Massachusetts Limited
Maturity Municipals Fund, EV Classic New York Limited Maturity Municipals Fund
and EV Classic Pennsylvania Limited Maturity Municipals Fund and our report
dated May 2, 1997, relating to Florida Limited Maturity Municipals Portfolio,
Massachusetts Limited Maturity Municipals Portfolio, New York Limited Maturity
Municipals Portfolio and Pennsylvania Limited Maturity Municipals Portfolio
which reports are incorporated by reference in the Statement of Additional
Information, which is a part of such Registration Statement. We also consent
to the references to us under the heading "The Funds" Financial Highlights"
appearing in the Prospectus and under the heading "Financial Statements" in
the Statement of Additional Information, which are part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
----------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Marathon California Limited Maturity Municipals Fund, EV
Marathon Connecticut Limited Maturity Municipals Fund, EV Marathon Florida
Limited Maturity Municipals Fund, EV Marathon Massachusetts Limited Maturity
Municipals Fund, EV Marathon Michigan Limited Maturity Municipals Fund, EV
Marathon New Jersey Limited Maturity Municipals Fund, EV Marathon New York
Limited Maturity Municipals Fund, EV Marathon Ohio Limited Maturity Municipals
Fund and EV Marathon Pennsylvania Limited Maturity Municipals Fund of our
report dated May 2, 1997, relating to EV Marathon California Limited Maturity
Municipals Fund, EV Marathon Connecticut Limited Maturity Municipals Fund, EV
Marathon Florida Limited Maturity Municipals Fund, EV Marathon Massachusetts
Limited Maturity Municipals Fund, EV Marathon Michigan Limited Maturity
Municipals Fund, EV Marathon New Jersey Limited Maturity Municipals Fund, EV
Marathon New York Limited Maturity Municipals Fund, EV Marathon Ohio Limited
Maturity Municipals Fund and EV Marathon Pennsylvania Limited Maturity
Municipals Fund and our report dated May 2, 1997, relating to California
Limited Maturity Municipals Portfolio, Connecticut Limited Maturity Municipals
Portfolio, Florida Limited Maturity Municipals Portfolio, Massachusetts
Limited Maturity Municipals Portfolio, Michigan Limited Maturity Municipals
Portfolio, New Jersey Limited Maturity Municipals Portfolio, New York Limited
Maturity Municipals Portfolio, Ohio Limited Maturity Municipals Portfolio and
Pennsylvania Limited Maturity Municipals Portfolio which reports are
incorporated by reference in the Statement of Additional Information, which is
a part of such Registration Statement. We also consent to the references to us
under the heading "The Funds" Financial Highlights" appearing in the
Prospectus and under the heading "Financial Statements" in the Statement of
Additional Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Traditional California Limited Maturity Municipals Fund,
EV Traditional Connecticut Limited Maturity Municipals Fund, EV Traditional
Florida Limited Maturity Municipals Fund, EV Traditional Michigan Limited
Maturity Municipals Fund, EV Traditional New Jersey Limited Maturity
Municipals Fund, EV Traditional New York Limited Maturity Municipals Fund and
EV Traditional Ohio Limited Maturity Municipals Fund of our report dated May
2, 1997, relating to EV Traditional California Limited Maturity Municipals
Fund, EV Traditional Connecticut Limited Maturity Municipals Fund, EV
Traditional Florida Limited Maturity Municipals Fund, EV Traditional Michigan
Limited Maturity Municipals Fund, EV Traditional New Jersey Limited Maturity
Municipals Fund, EV Traditional New York Limited Maturity Municipals Fund, EV
Traditional Ohio Limited Maturity Municipals Fund and our report dated May 2,
1997, relating to California Limited Maturity Municipals Portfolio,
Connecticut Limited Maturity Municipals Portfolio, Florida Limited Maturity
Municipals Portfolio, Michigan Limited Maturity Municipals Portfolio, New
Jersey Limited Maturity Municipals Portfolio, New York Limited Maturity
Municipals Portfolio and Ohio Limited Maturity Municipals Portfolio which
reports are incorporated by reference in the Statement of Additional
Information, which is a part of such Registration Statement. We also consent
to the references to us under the heading "The Funds" Financial Highlights"
appearing in the Prospectus and under the heading "Financial Statements" in
the Statement of Additional Information, which are part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(D)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Classic National Limited Maturity Municipals Fund of our
report dated May 2, 1997, relating to EV Classic National Limited Maturity
Municipals Fund and of our report dated May 2, 1997, relating to National
Limited Maturity Municipals Portfolio which reports are incorporated by
reference in the Statement of Additional Information, which is a part of such
Regisration Statement. We also consent to the references to us under the
heading "The Fund's Financial Highlights" appearing in the Prospectus and
under the heading "Financial Statements" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(E)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Marathon National Limited Maturity Municipals Fund of
our report dated May 2, 1997, relating to EV Marathon National Limited
Maturity Municipals Fund and of our report dated May 2, 1997, relating to
National Limited Maturity Municipals Portfolio which reports are incorporated
by reference in the Statement of Additional Information, which is a part of
such Regisration Statement. We also consent to the references to us under the
heading "The Fund's Financial Highlights" appearing in the Prospectus and
under the heading "Financial Statements" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(F)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of EV Traditional National Limited Maturity Municipals Fund of
our report dated May 2, 1997, relating to EV Traditional National Limited
Maturity Municipals Fund and of our report dated May 2, 1997, relating to
National Limited Maturity Municipals Portfolio which reports are incorporated
by reference in the Statement of Additional Information, which is a part of
such Regisration Statement. We also consent to the references to us under the
heading "The Fund's Financial Highlights" appearing in the Prospectus and
under the heading "Financial Statements" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 16
INVESTMENT PERFORMANCE -- EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,224.99 $1,224.99 22.50% 4.28% 22.50% 4.28%
1 YEAR ENDED
03/31/97 03/31/96 $1,018.76 $1,008.95 1.88% 1.88% 0.90% 0.90%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $25,662
Plus Dividend Income Earned:
Equal Gross Income: $25,662
Minus Expenses: $8,011
-------
Equal Net Investment Income: $17,651
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 613,642
-------
Equal Net Investment Income Earned Per Share: $0.0288
Net Asset Value Per Share 3/31/97: $9.44
30 Day Yield*: 3.68%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 5.33%
Divided by one minus a tax rate of 34.48%: 0.6552
-------
Equal Tax Equivalent Yield***: 5.62%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0288/$9.44)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Florida tax rate of 34.48%
<PAGE>
INVESTMENT PERFORMANCE -- EV CLASSIC MASSACHUSETTS
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $1,229.62 $1,229.62 22.96% 4.37% 22.96% 4.37%
1 YEAR ENDED
03/31/97 03/31/96 $1,027.04 $1,017.15 2.70% 2.70% 1.72% 1.72%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $21,172
Plus Dividend Income Earned:
-------
Equal Gross Income: $21,172
Minus Expenses: $ 6,737
-------
Equal Net Investment Income: $14,435
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 481,303
-------
Equal Net Investment Income Earned Per Share: $0.0300
Net Asset Value Per Share 3/31/97: $9.57
30 Day Yield*: 3.79%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 5.49%
Divided by one minus a tax rate of 39.28%: 0.6072
------
Equal Tax Equivalent Yield***: 6.24%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0300/9.57)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Massachusetts tax rate of 39.28%
<PAGE>
INVESTMENT PERFORMANCE -- EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $1,232.94 $1,232.94 23.29% 4.42% 23.29% 4.42%
1 YEAR ENDED
03/31/97 03/31/96 $1,028.37 $1,018.46 2.84% 2.84% 1.85% 1.85%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC NEW YORK LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $14,549
Plus Dividend Income Earned:
-------
Equal Gross Income: $14,549
Minus Expenses: $4,640
-------
Equal Net Investment Income: $9,909
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 328,223
-------
Equal Net Investment Income Earned Per Share: $0.0302
Net Asset Value Per Share 3/31/97: $9.52
30 Day Yield*: 3.72%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 5.39%
Divided by one minus a tax rate of 38.99%: 0.6101
-------
Equal Tax Equivalent Yield***: 6.10%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0302/$9.53)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New York tax rate of 38.99%
<PAGE>
INVESTMENT PERFORMANCE -- EV CLASSIC PENNSYLVANIA
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $1,247.51 $1,247.51 24.75% 4.69% 24.75% 4.69%
1 YEAR ENDED
03/31/97 03/31/96 $1,029.29 $1,019.38 2.93% 2.93% 1.94% 1.94%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $26,171
Plus Dividend Income Earned:
-------
Equal Gross Income: $26,171
Minus Expenses: $8,314
-------
Equal Net Investment Income: $17,857
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 598,979
-------
Equal Net Investment Income Earned Per Share: $0.0298
Net Asset Value Per Share 3/31/97: $9.57
30 Day Yield*: 3.77%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 5.46%
Divided by one minus a tax rate of 40.25%: 0.5975
-------
Equal Tax Equivalent Yield***: 6.31%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0298/$9.57)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 40.25%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON CALIFORNIA
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $1,230.89 $1,230.89 23.09% 4.39% 23.09% 4.39%
1 YEAR ENDED
03/31/97 03/31/96 $1,029.91 $1,000.21 2.99% 2.99% 0.02% 0.02%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 121,997
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 121,997
Minus Expenses: $ 38,711
---------
Equal Net Investment Income: $ 83,286
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,706,258
---------
Equal Net Investment Income Earned Per Share: $ 0.0308
Net Asset Value Per Share 3/31/97: $ 9.97
30 Day Yield*: 3.73%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 5.41%
Divided by one minus a tax rate of 37.90%: 0.6210
---------
Equal Tax Equivalent Yield***: 6.01%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0308/$9.97)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and California tax rate of 37.90%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON CONNECTICUT
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $1,143.59 $1,133.80 14.36% 3.45% 13.38% 3.22%
1 YEAR ENDED
03/31/97 03/31/96 $1,032.10 $1,002.28 3.21% 3.21% 0.23% 0.23%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 48,349
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 48,349
Minus Expenses: $ 13,540
---------
Equal Net Investment Income: $ 34,809
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 1,079,496
---------
Equal Net Investment Income Earned Per Share: $ 0.0322
Net Asset Value Per Share 3/31/97: $ 9.77
30 Day Yield*: 4.00%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 5.80%
Divided by one minus a tax rate of 34.11%: 0.6589
---------
Equal Tax Equivalent Yield***: 6.06%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0322/$9.78)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $1,229.71 $1,229.71 22.97% 4.36% 22.97% 4.36%
1 YEAR ENDED
03/31/97 03/31/96 $1,020.48 $991.04 2.05% 2.05% -0.90% -0.90%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 232,796
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 232,796
Minus Expenses: $ 70,259
---------
Equal Net Investment Income: $ 162,537
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 5,261,192
---------
Equal Net Investment Income Earned Per Share: $ 0.0309
Net Asset Value Per Share 3/31/97: $ 9.98
30 Day Yield*: 3.74%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 5.42%
Divided by one minus a tax rate of 34.42%: 0.6558
---------
Equal Tax Equivalent Yield***: 5.70%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0309/$9.98)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Florida tax rate of 34.42%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON MASSACHUSETTS
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $1,231.63 $1,231.63 23.16% 4.41% 23.16% 4.41%
1 YEAR ENDED
03/31/97 03/31/96 $1,027.40 $997.73 2.74% 2.74% -0.23% -0.23%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $198,392
Plus Dividend Income Earned:
------
Equal Gross Income: $198,392
Minus Expenses: $59,595
------
Equal Net Investment Income: $138,797
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,308,265
------
Equal Net Investment Income Earned Per Share: $0.0322
Net Asset Value Per Share 3/31/97: $9.99
30 Day Yield*: 3.90%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.65%
Divided by one minus a tax rate of 39.28%: 0.6072
------
Equal Tax Equivalent Yield***: 6.41%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0322/$9.99)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Massachusetts tax rate of 39.28%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $1,143.39 $1,133.65 14.34% 3.44% 13.36% 3.22%
1 YEAR ENDED
03/31/97 03/31/96 $1,041.43 $1,011.43 4.14% 4.14% 1.14% 1.14%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 63,117
Plus Dividend Income Earned:
--------
Equal Gross Income: $ 63,117
Minus Expenses: $ 20,087
--------
Equal Net Investment Income: $ 43,030
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 1,398,150
--------
Equal Net Investment Income Earned Per Share: $ 0.0308
Net Asset Value Per Share 3/31/97: $ 9.73
30 Day Yield*: 3.83%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 5.55%
Divided by one minus a tax rate of 35.93%: 0.6407
--------
Equal Tax Equivalent Yield***: 5.98%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0308/$9.73)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON NEW JERSEY
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $1,238.99 $1,238.99 23.90% 4.54% 23.90% 4.54%
1 YEAR ENDED
03/31/97 03/31/96 $1,035.26 $1,005.38 3.53% 3.53% 0.54% 0.54%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 165,910
Plus Dividend Income Earned:
----------
Equal Gross Income: $ 165,910
Minus Expenses: $ 52,689
----------
Equal Net Investment Income: $ 113,221
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,658,528
----------
Equal Net Investment Income Earned Per Share: $ 0.0309
Net Asset Value Per Share 3/31/97: $ 10.07
30 Day Yield*: 3.72%
Divided by One minus the Tax Rate of 31%: 0.69
----------
Equal Tax Equivalent Yield **: 5.39%
Divided by one minus a tax rate of 35.40%: 0.6460
----------
Equal Tax Equivalent Yield***: 5.76%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0309/$10.07)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $1,235.56 $1,235.56 23.56% 4.47% 23.56% 4.47%
1 YEAR ENDED
03/31/97 03/31/96 $1,027.93 $998.26 2.79% 2.79% -0.17% -0.17%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 295,005
Plus Dividend Income Earned:
---------
Equal Gross Income: $ 295,005
Minus Expenses: $ 87,328
---------
Equal Net Investment Income: $ 207,677
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 6,442,692
---------
Equal Net Investment Income Earned Per Share: $ 0.0322
Net Asset Value Per Share 3/31/97: $ 10.04
30 Day Yield*: 3.88%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 5.62%
Divided by one minus a tax rate of 38.99%: 0.6101
---------
Equal Tax Equivalent Yield***: 6.36%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0322/$10.04)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New York tax rate of 38.99%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $1,153.66 $1,143.84 15.37% 3.68% 14.38% 3.45%
1 YEAR ENDED
03/31/97 03/31/96 $1,038.90 $1,008.96 3.89% 3.89% 0.90% 0.90%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $119,965
Plus Dividend Income Earned:
---------
Equal Gross Income: $119,965
Minus Expenses: $36,778
---------
Equal Net Investment Income: $83,187
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 2,557,651
---------
Equal Net Investment Income Earned Per Share: $0.0325
Net Asset Value Per Share 3/31/97: $9.82
30 Day Yield*: 4.01%
Divided by One minus the Tax Rate of 31%: 0.69
---------
Equal Tax Equivalent Yield **: 5.81%
Divided by one minus a tax rate of 35.76%: 0.6424
---------
Equal Tax Equivalent Yield***: 6.23%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0325/$9.82)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Ohio tax rate of 35.76%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON PENNSYLVANIA
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $1,246.95 $1,246.95 24.70% 4.68% 24.70% 4.68%
1 YEAR ENDED
03/31/97 03/31/96 $1,031.22 $1,001.49 3.12% 3.12% 0.15% 0.15%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $166,573
Plus Dividend Income Earned:
--------
Equal Gross Income: $166,573
Minus Expenses: $ 49,649
--------
Equal Net Investment Income: $116,924
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,606,225
--------
Equal Net Investment Income Earned Per Share: $ 0.0324
Net Asset Value Per Share 3/31/97: $ 10.10
30 Day Yield*: 3.88%
Divided by One minus the Tax Rate of 31%: 0.69
--------
Equal Tax Equivalent Yield **: 5.62%
Divided by one minus a tax rate of 40.05%: 0.5995
--------
Equal Tax Equivalent Yield***: 6.47%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0324/$10.1)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Pennsylvania tax rate of 40.05%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL CALIFORNIA
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $977.44 $1,219.44 24.76% 4.68% 21.94% 4.18%
1 YEAR ENDED
03/31/97 03/31/96 $977.71 $1,012.67 3.58% 3.58% 1.27% 1.27%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL CALIFORNIA LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $12,841
Plus Dividend Income Earned:
-------
Equal Gross Income: $12,841
Minus Expenses: $ 2,781
-------
Equal Net Investment Income: $10,060
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 298,790
-------
Equal Net Investment Income Earned Per Share: $0.0337
Net Asset Value Per Share 3/31/97: $ 9.78
30 Day Yield*: 4.16%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.03%
Divided by one minus a tax rate of 37.90%: 0.6210
-------
Equal Tax Equivalent Yield***: 6.70%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0337/$9.78)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and California tax rate of 37.90%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL CONNECTICUT
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $977.43 $1,112.03 13.78% 3.31% 11.20% 2.72%
1 YEAR ENDED
03/31/97 03/31/96 $977.62 $1,012.21 3.54% 3.54% 1.22% 1.22%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL CONNECTICUT LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 5,977
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 5,977
Minus Expenses: $ 1,171
-------
Equal Net Investment Income: $ 4,806
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 137,807
-------
Equal Net Investment Income Earned Per Share: $0.0349
Net Asset Value Per Share 3/31/97: $ 9.75
30 Day Yield*: 4.33%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.28%
Divided by one minus a tax rate of 34.11%: 0.6589
------
Equal Tax Equivalent Yield***: 6.57%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($9.75/$.0349)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Connecticut tax rate of 34.11%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL FLORIDA
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $977.42 $1,225.07 25.34% 4.78% 22.51% 4.28%
1 YEAR ENDED
03/31/97 03/31/96 $977.80 $1,006.13 2.90% 2.90% 0.61% 0.61%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL FLORIDA LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earne $16,767
Plus Dividend Income Earned:
-------
Equal Gross Incom $16,767
Minus Expense $2,782
-------
Equal Net Investment Incom $13,985
Divided by Average daily number of shares
outstanding that were entitled
to receive dividend 380,941
-------
Equal Net Investment Income Earned Per Shar $0.0367
Net Asset Value Per Share 3/31/9 $10.18
30 Day Yield 4.37%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.33%
Divided by one minus a tax rate of 33.9 0.6606
-------
Equal Tax Equivalent Yield** 6.62%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0367/$10.18)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Florida tax rate of 33.94%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL MICHIGAN
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $977.70 $1,121.23 14.72% 3.53% 12.12% 2.93%
1 YEAR ENDED
03/31/97 03/31/96 $977.55 $1,024.28 4.78% 4.78% 2.43% 2.43%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL MICHIGAN LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 4,735
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 4,735
Minus Expenses: $ 1,067
-------
Equal Net Investment Income: $ 3,668
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 108,089
-------
Equal Net Investment Income Earned Per Share: $0.0339
Net Asset Value Per Share 3/31/97: $ 9.82
30 Day Yield*: 4.18%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.06%
Divided by one minus a tax rate of 35.93%: 0.6407
-------
Equal Tax Equivalent Yield***: 6.52%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($9.82/$.0339)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Michigan tax rate of 35.93%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NEW JERSEY
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from June 1, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 06/01/92 $977.03 $1,216.74 24.53% 4.65% 21.67% 4.15%
1 YEAR ENDED
03/31/97 03/31/96 $977.75 $1,016.29 3.94% 3.94% 1.63% 1.63%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 4,823
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 4,823
Minus Expenses: $ 1,446
-------
Equal Net Investment Income: $ 3,377
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 112,632
-------
Equal Net Investment Income Earned Per Share: $0.0300
Net Asset Value Per Share 3/31/97: $ 9.84
30 Day Yield*: 3.69%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 5.35%
Divided by one minus a tax rate of 35.40%: 0.6460
-------
Equal Tax Equivalent Yield***: 5.71%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0300/$9.84)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New Jersey tax rate of 35.40%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NEW YORK
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 29, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/29/92 $977.44 $1,242.74 27.14% 5.09% 24.27% 4.59%
1 YEAR ENDED
03/31/97 03/31/96 $977.05 $1,012.04 3.58% 3.58% 1.20% 1.20%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL NEW YORK LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $ 2,591
Plus Dividend Income Earned:
-------
Equal Gross Income: $ 2,591
Minus Expenses: $ 367
-------
Equal Net Investment Income: $ 2,224
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 58,484
-------
Equal Net Investment Income Earned Per Share: $0.0380
Net Asset Value Per Share 3/31/97: $ 10.28
30 Day Yield*: 4.48%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.49%
Divided by one minus a tax rate of 38.99%: 0.6101
-------
Equal Tax Equivalent Yield***: 7.34%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.038/$10.28)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and New York tax rate of 38.99%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL OHIO
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from April 16, 1993 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 04/16/93 $977.54 $1,127.88 15.38% 3.68% 12.79% 3.09%
1 YEAR ENDED
03/31/97 03/31/96 $977.62 $1,019.41 4.27% 4.27% 1.94% 1.94%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL OHIO LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $13,171
Plus Dividend Income Earned:
------
Equal Gross Income: $13,171
Minus Expenses: $3,305
------
Equal Net Investment Income: $9,866
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 288,188
------
Equal Net Investment Income Earned Per Share: $0.0342
Net Asset Value Per Share 3/31/97: $9.81
30 Day Yield*: 4.22%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.12%
Divided by one minus a tax rate of 35.76%: 0.6424
------
Equal Tax Equivalent Yield***: 6.57%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0342/$9.81)+1)-1]
** Assuming a tax rate of 31%
*** Assuming a combined federal and Ohio tax rate of 35.76%
<PAGE>
INVESTMENT PERFORMANCE -- EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 22, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/22/92 $1,245.93 $1,245.93 24.59% 4.63% 24.59% 4.63%
1 YEAR ENDED
03/31/97 03/31/96 $1,029.52 $1,019.62 2.95% 2.95% 1.96% 1.96%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC NATIONAL LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $47,171
Plus Dividend Income Earned:
-------
Equal Gross Income: $47,171
Minus Expenses: $14,448
-------
Equal Net Investment Income: $32,723
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 989,542
-------
Equal Net Investment Income Earned Per Share: $0.0331
Net Asset Value Per Share 3/31/97: $ 9.47
30 Day Yield*: 4.23%
Divided by One minus the Tax Rate of 31%: 0.69
-------
Equal Tax Equivalent Yield **: 6.13%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0331/$9.47)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 22, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/22/92 $1,255.25 $1,255.25 25.52% 4.79% 25.52% 4.79%
1 YEAR ENDED
03/31/97 03/31/96 $1,033.04 $1,003.34 3.30% 3.30% 0.33% 0.33%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND-CLASS 1
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $264,570
Plus Dividend Income Earned:
------
Equal Gross Income: $264,570
Minus Expenses: $86,131
------
Equal Net Investment Income: $178,439
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 5,205,646
------
Equal Net Investment Income Earned Per Share: $0.0343
Net Asset Value Per Share 3/31/97: $10.07
30 Day Yield*: 4.12%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.97%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0343/$10.07)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL NATIONAL
LIMITED MATURITY MUNICIPALS FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the period from May 22, 1992 through March 31, 1997 and for the 1 year period
ended March 31, 1997. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF FUND 05/22/92 $977.56 $1,254.72 28.35% 5.27% 25.47% 4.78%
1 YEAR ENDED
03/31/97 03/31/96 $977.42 $1,016.66 4.02% 4.02% 1.67% 1.67%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 2.25%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 2.25%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 2.25%.
</TABLE>
<PAGE>
EV TRADITIONAL NATIONAL LIMITED MATURITY MUNICIPALS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 3/31/97:
Interest Income Earned: $36,512
Plus Dividend Income Earned:
------
Equal Gross Income: $36,512
Minus Expenses: $8,830
------
Equal Net Investment Income: $27,682
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 744,834
------
Equal Net Investment Income Earned Per Share: $0.0372
Net Asset Value Per Share 3/31/97: $9.97
30 Day Yield*: 4.52%
Divided by One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.55%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0372/$9.97)+1)-1]
** Assuming a tax rate of 31%
<PAGE>
Exhibit (17)(a)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Eaton Vance Investment
Trust, a Massachusetts business trust, do hereby severally constitute and
appoint Alan R. Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to
be true, sufficient and lawful attorneys, or attorney for each of us, to sign
for each of us, in the name of each of us in the capacities indicated below, any
and all amendments (including post-effective amendments) to the Registration
Statement on Form N-1A filed by Eaton Vance Investment Trust with the Securities
and Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- -----
President (Chief
/s/ Thomas J. Fetter Executive Officer) April 22, 1997
- --------------------
Thomas J. Fetter
Treasurer and Principal
/s/ James L. O'Connor Financial and Accounting April 22, 1997
- ------------------------- Officer
James L. O'Connor
/s/ Donald R. Dwight Trustee April 22, 1997
- -------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee April 22, 1997
- -------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee April 22, 1997
- -------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee April 22, 1997
- -------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee April 22, 1997
- -------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee April 22, 1997
- --------------------------
Jack L. Treynor
<PAGE>
Exhibit (17)(b)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of California Limited
Maturity Municipals Portfolio, Connecticut Limited Maturity Municipals
Portfolio, Florida Limited Maturity Municipals Portfolio, Massachusetts Limited
Maturity Municipals Portfolio, Michigan Limited Maturity Municipals Portfolio,
National Limited Maturity Municipals Portfolio, New Jersey Limited Maturity
Municipals Portfolio, New York Limited Maturity Municipals Portfolio, Ohio
Limited Maturity Municipals Portfolio and Pennsylvania Limited Maturity
Municipals Portfolio, each a New York trust, do hereby severally constitute and
appoint Alan R. Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to
be true, sufficient and lawful attorneys, or attorney for each of us, to sign
for each of us, in the name of each of us in the capacities indicated below, any
and all amendments (including post-effective amendments) to the Registration
Statement on Form N-1A filed by Eaton Vance Investment Trust with the Securities
and Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- ----
President and
/s/ Thomas J. Fetter Principal Executive April 22, 1997
- ----------------------- Officer
Thomas J. Fetter
Treasurer and
/s/ James L. O'Connor Principal Financial April 22, 1997
- ----------------------- and Accounting
James L. O'Connor Officer
/s/ Donald R. Dwight Trustee April 22, 1997
- -----------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee April 22, 1997
- -----------------------
James B. Hawkes
/s/ Samuel L. Hayes, I Trustee April 22, 1197
- -----------------------
Samuel L. Hayes, I
/s/ Norton H. Reamer Trustee April 22, 1997
- -----------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee April 22, 1997
- -----------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee April 22, 1997
- -----------------------
Jack L. Treynor
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 14
<NAME>EV CLASSIC FLORIDA LIMITED MATURITY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 5,830
<INVESTMENTS-AT-VALUE> 5,782
<RECEIVABLES> 7
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,793
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,957
<SHARES-COMMON-STOCK> 613
<SHARES-COMMON-PRIOR> 863
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,127)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (48)
<NET-ASSETS> 5,787
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 337
<EXPENSES-NET> 76
<NET-INVESTMENT-INCOME> 261
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 261
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 256
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36
<NUMBER-OF-SHARES-REDEEMED> 303
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> (2,512)
<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> 84
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.620
<PER-SHARE-NII> 0.364
<PER-SHARE-GAIN-APPREC> (0.187)
<PER-SHARE-DIVIDEND> 0.357
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.440
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 15
<NAME>EV CLASSIC MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 4,589
<INVESTMENTS-AT-VALUE> 4,602
<RECEIVABLES> 14
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,814
<SHARES-COMMON-STOCK> 482
<SHARES-COMMON-PRIOR> 522
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (214)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13
<NET-ASSETS> 4,615
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 237
<EXPENSES-NET> 51
<NET-INVESTMENT-INCOME> 186
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 182
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40
<NUMBER-OF-SHARES-REDEEMED> 97
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> (438)
<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> 65
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.680
<PER-SHARE-NII> 0.376
<PER-SHARE-GAIN-APPREC> (0.119)
<PER-SHARE-DIVIDEND> 0.367
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.570
<EXPENSE-RATIO> 1.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 18
<NAME>EV CLASSIC NEW YORK LIMITED MATURITY MUNCIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 2,983
<INVESTMENTS-AT-VALUE> 2,985
<RECEIVABLES> 14
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,002
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15
<TOTAL-LIABILITIES> 15
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,276
<SHARES-COMMON-STOCK> 314
<SHARES-COMMON-PRIOR> 422
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1
<NET-ASSETS> 2,987
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 185
<EXPENSES-NET> 42
<NET-INVESTMENT-INCOME> 143
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 143
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 142
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 143
<NUMBER-OF-SHARES-REDEEMED> 263
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> (1,077)
<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> 56
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.620
<PER-SHARE-NII> 0.362
<PER-SHARE-GAIN-APPREC> (0.094)
<PER-SHARE-DIVIDEND> 0.358
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.530
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 19
<NAME>EV CLASSIC PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 5,784
<INVESTMENTS-AT-VALUE> 5,723
<RECEIVABLES> 8
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,734
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51
<TOTAL-LIABILITIES> 51
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,251
<SHARES-COMMON-STOCK> 594
<SHARES-COMMON-PRIOR> 775
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (547)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (26)
<NET-ASSETS> 5,683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 331
<EXPENSES-NET> 78
<NET-INVESTMENT-INCOME> 253
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 247
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84
<NUMBER-OF-SHARES-REDEEMED> 285
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> (1,797)
<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> 86
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.660
<PER-SHARE-NII> 0.377
<PER-SHARE-GAIN-APPREC> (0.100)
<PER-SHARE-DIVIDEND> 0.367
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.570
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000779991
<NAME> EATON VANCE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME>EV MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND-Class I
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 39,703
<INVESTMENTS-AT-VALUE> 40,369
<RECEIVABLES> 0
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,370
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 266
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,894
<SHARES-COMMON-STOCK> 2,544,562
<SHARES-COMMON-PRIOR> 5,382
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (66)
<ACCUMULATED-NET-GAINS> (2,390)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 666
<NET-ASSETS> 40,104
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2,376
<EXPENSES-NET> 463
<NET-INVESTMENT-INCOME> 1,913
<REALIZED-GAINS-CURRENT> (105)
<APPREC-INCREASE-CURRENT> (327)
<NET-CHANGE-FROM-OPS> 1,481
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,922
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44
<NUMBER-OF-SHARES-REDEEMED> 1,178
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> (14,137)
<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> 463
<AVERAGE-NET-ASSETS> 47,521
<PER-SHARE-NAV-BEGIN> 10.080
<PER-SHARE-NII> 0.393
<PER-SHARE-GAIN-APPREC> (0.097)
<PER-SHARE-DIVIDEND> 0.393
<PER-SHARE-DISTRIBUTIONS> 0.003
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.980
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892304
<NAME> CALIFORNIA LIMITED MATURITY MUNICIPALS PORTFOLIO
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000897623
<NAME> CONNECTICUT LIMITED MATURITY MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892301
<NAME> FLORIDA LIMITED MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892300
<NAME> MASSACHUSETTS LIMITED MATURITY MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000897638
<NAME> MICHIGAN LIMITED MATURITY MUICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892338
<NAME> NEW JERSEY LIMITED MATURITY MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892297
<NAME> NEW YORK LIMITED MATURITY MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000897636
<NAME> OHIO LIMITED MATURITY MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000904104
<NAME> PENNSYLVANIA LIMITED MUNICIPALS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892299
<NAME> NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO
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<S> <C>
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</TABLE>
