<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1998
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. 39 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 42 [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 pursuant [ ] on (date) pursuant to paragraph (a)(1)
to paragraph (b)
[X] on April 1, 1998 pursuant to [ ] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[ ] 60 days after filing pursuant [ ] on (date) pursuant to paragraph (a)(2).
to paragraph (a)(1)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest
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.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under Securities Act of 1933
Part A--The Combined Prospectus of:
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance
Connecticut Limited Maturity Municipals Fund Eaton Vance Florida
Limited Maturity Municipals Fund Eaton Vance Massachusetts Limited
Maturity Municipals Fund Eaton Vance Michigan Limited Maturity
Municipals Fund Eaton Vance New Jersey Limited Maturity Municipals
Fund Eaton Vance New York Limited Maturity Municipals Fund Eaton Vance
Ohio Limited Maturity Municipals Fund Eaton Vance Pennsylvania Limited
Maturity Municipals Fund
The Prospectus of:
Eaton Vance National Limited Maturity Municipals Fund
Part B--The Combined Statement of Additional Information of: Eaton Vance
California Limited Maturity Municipals Fund Eaton Vance Connecticut
Limited Maturity Municipals Fund Eaton Vance Florida Limited Maturity
Municipals Fund Eaton Vance Massachusetts Limited Maturity Municipals
Fund Eaton Vance Michigan Limited Maturity Municipals Fund Eaton Vance
New Jersey Limited Maturity Municipals Fund Eaton Vance New York
Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity
Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals
Fund
The Statement of Additional Information of:
Eaton Vance 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
EATON VANCE 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 Objectives; 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 Not Applicable
Performance
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 Shares; How to Buy Shares; The
Lifetime Investing Account/Distribution
Options; Distribution and Service Plans;
The Eaton Vance Exchange Privilege; Eaton
Vance Shareholder Services
8. ..................... Redemption or Repurchase How to Redeem 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
15. ..................... Control Persons and Principal Holders Control Persons and Principal Holders of
of Securities Securities
16. ..................... Investment Advisory and Other Investment Adviser and Administrator;
Services Distribution Plan -- Class B and Class C
Shares; Service Plan -- Class A Shares;
Custodian; Independent Certified Public
Accountants
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions
Practices
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 -- Class A
Shares; Distribution Plan -- Class B and
Class C Shares; Service Plan -- Class A
Shares
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter
22. ..................... Calculation of Performance Data Investment Performance
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
EATON VANCE INVESTMENT TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE 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 Not Applicable
Performance
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 Shares; How to Buy Shares; The
Lifetime Investing Account/Distribution
Options; Distribution and Service Plans;
The Eaton Vance Exchange Privilege; Eaton
Vance Shareholder Services
8. ..................... Redemption or Repurchase How to Redeem 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
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 Plans -- Class B and Class C
Shares; Service Plan -- Class A Shares; Custodian;
Independent Certified Public Accountants
17. ..................... Brokerage Allocation and Other Portfolio Security Transactions
Practices
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 -- Class A
Shares; Distribution Plans -- Class B and
Class C Shares; Service Plan -- Class A Shares
20. ..................... Tax Status Taxes; Tax Equivalent Yield Table
21. ..................... Underwriters Principal Underwriter
22. ..................... Calculation of Performance Data Investment Performance
23. ..................... Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Investing
[GRAPHIC OMITTED] for the
21st
Century
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
These Funds (the "Funds") are mutual funds seeking to provide (1) a high level
of current income exempt from regular federal income tax and the 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 April 1, 1998
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.
CONTENTS
<TABLE>
<CAPTION>
Page Page
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Redeem Shares 24
The Funds' Financial Highlights 5 Reports to Shareholders 25
The Funds' Investment Objectives 14 The Lifetime Investing Account/Distribution Options 25
Investment Policies and Risks 14 The Eaton Vance Exchange Privilege 26
Organization of the Funds and the Portfolios 18 Eaton Vance Shareholder Services 27
Management of the Funds and the Portfolios 19 Distributions and Taxes 27
Distribution and Service Plans 20 Performance Information 28
Valuing Shares 21 Appendix -- State Specific Information 30
How to Buy Shares 22
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated April 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 2.25% None None
Sales Charge Imposed on Reinvested
Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 3.00% 1.00%
Annual Fund and Allocated Portfolio Operating Expenses (as a
percentage of average daily net assets)
Rule 12b-1
Investment Distribution Total
Adviser and/or Other Operating
Fees Service Fees Expenses Expenses
- ------------------------------------------------------------------------------
California Fund
Class A shares 0.47% 0.15% 0.34% 0.96%
Class B shares 0.47 0.90 0.34 1.71
Connecticut Fund
Class A shares 0.23% 0.14% 0.61% 0.98%
Class B shares 0.23 0.88 0.61 1.72
Florida Fund
Class A shares 0.46% 0.14% 0.29% 0.89%
Class B shares 0.46 0.90 0.29 1.65
Class C shares 0.46 0.90 0.29 1.65
Massachusetts Fund
Class A shares 0.47% 0.15% 0.31% 0.93%
Class B shares 0.47 0.90 0.31 1.68
Class C shares 0.47 0.90 0.31 1.68
Michigan Fund
Class A shares 0.48% 0.15% 0.61% 1.24%
Class B shares 0.48 0.90 0.61 1.99
New Jersey Fund
Class A shares 0.47% 0.15% 0.32% 0.94%
Class B shares 0.47 0.90 0.32 1.69
New York Fund
Class A shares 0.46% 0.15% 0.28% 0.89%
Class B shares 0.46 0.89 0.28 1.63
Class C shares 0.46 0.90 0.28 1.64
Ohio Fund
Class A shares 0.48% 0.15% 0.46% 1.09%
Class B shares 0.48 0.90 0.46 1.84
Pennsylvania Fund
Class A shares 0.47% 0.15% 0.32% 0.94%
Class B shares 0.47 0.90 0.32 1.69
Class C shares 0.47 0.90 0.32 1.69
<PAGE>
EXAMPLE
An investor would pay the following expenses and, in the case of Class A shares,
maximum initial sales charge, or, in the case of Class B and Class C shares, the
applicable contingent deferred sales charge on a $1,000 investment, assuming (a)
5% annual return and (b) redemption at the end of each period (and, for Class B
and Class C shares, no redemption):
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
California Fund
Class A shares $32 $52 $74 $138
Class B shares 47 74 84 146
Class B shares
(no redemption) 17 54 84 146
Connecticut Fund
Class A shares $32 $53 $75 $140
Class B shares 47 74 84 147
Class B shares
(no redemption) 17 54 84 147
Florida Fund
Class A shares $31 $50 $71 $130
Class B shares 47 72 80 135
Class B shares
(no redemption) 17 52 80 135
Class C shares 27 52 90 195
Class C shares
(no redemption) 17 52 90 195
Massachusetts Fund
Class A shares $32 $51 $73 $134
Class B shares 47 73 83 144
Class B shares
(no redemption) 17 53 83 144
Class C shares 27 53 91 199
Class C shares
(no redemption) 17 53 91 199
Michigan Fund
Class A shares $35 $61 $89 $169
Class B shares 50 82 99 178
Class B shares
(no redemption) 20 62 99 178
New Jersey Fund
Class A shares $32 $52 $73 $135
Class B shares 47 73 83 143
Class B shares
(no redemption) 17 53 83 143
New York Fund
Class A shares $31 $50 $71 $130
Class B shares 47 71 80 135
Class B shares
(no redemption) 17 51 80 135
Class C shares 27 52 89 194
Class C shares
(no redemption) 17 52 89 194
Ohio Fund
Class A shares $33 $55 $81 $152
Class B shares 48 78 90 157
Class B shares
(no redemption) 19 58 90 157
Pennsylvania Fund
Class A shares $32 $52 $73 $135
Class B shares 47 73 83 145
Class B shares
(no redemption) 17 53 83 145
Class C shares 27 53 92 200
Class C shares
(no redemption) 17 53 92 200
NOTES: The table and Example summarize the aggregate expenses of the
Portfolios and each class of shares of the Funds and are designed to help
investors understand the costs and expenses they will bear, directly or
indirectly, by investing in a Fund. Class B shares convert to Class A shares
approximately four years after purchase, therefore years 5 and 10 in the
Example reflect Class A expenses. See "How to Buy Shares -- Conversion
Feature." Information for Class B shares is for the most recent fiscal year.
Information for Class A and Class C shares is estimated based upon the most
recent fiscal year of its predecessor fund adjusted for the multiple-class
structure. 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 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. Long-term holders of Class B and Class C shares 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. For
further information regarding the expenses of the Funds and the Portfolios,
see "The Funds" Financial Highlights," "Management of the Funds and the
Portfolios," "Distribution and Service Plans" and "How to Redeem Shares."
Each Fund offers multiple classes of shares. Class A shares are sold subject
to a sales charge imposed at the time of purchase. No sales charge is payable
at the time of purchase on investments in Class A shares of $1 million or
more. However, a contingent deferred sales charge ("CDSC") of 0.50% will be
imposed on such investments in the event of certain redemptions within 12
months of purchase. Class B shares are sold subject to a declining CDSC (3%
maximum) if redeemed within four years of purchase and Class C shares are sold
subject to a 1% CDSC if redeemed within one year of purchase. The CDSC does
not apply in certain circumstances. See "How to Buy Shares" and "How to Redeem
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 19.
Each Fund invests exclusively in its corresponding Portfolio. Other investment
companies with different distribution arrangements and fees may invest in the
Portfolios in the future. See "Organization of the Funds and the Portfolios."
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the financial
statements that appear in the Funds' semi-annual and annual reports to
shareholders. The Funds' annual financial statements have been audited by
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing. The annual financial statements, the independent
auditors' report and the unaudited semi-annual financial statements are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of a Fund is contained in its
annual and semi-annual reports to shareholders which may be obtained without
charge by contacting the Principal Underwriter. The financial information for
each of the periods presented in the Funds' Financial Highlights are for Class
I and Class II shares of each Fund prior to reclassification as Class B and
Class A shares, respectively, on April 1, 1998. Information for Class C shares
is not presented because that class did not exist prior to April 1, 1998. The
financial highlights for Class C shares will differ from the Financial
Highlights presented below due to the different fees imposed on Class C
shares.
<TABLE>
<CAPTION>
California Fund (Class B)
------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ----------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- -----------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.980 $ 9.980 $10.080 $ 9.940 $ 9.950 $10.050 $10.340 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations:
Net investment
income $ 0.170 $ 0.228 $ 0.393 $ 0.363 $ 0.385 $ 0.367 $ 0.380 $ 0.333
Net realized and
unrealized gain
(loss) on
investments 0.290 0.268 (0.097) 0.037+++ 0.134 (0.027) (0.180) 0.443
------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.460 $0.496 $ 0.296 $ 0.400 $ 0.519 $ 0.340 $ 0.200 $ 0.776
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.194) $(0.234) $(0.393) $(0.360) $(0.385) $(0.367) $(0.380) $(0.333)
In excess of net
investment income (5) (0.006) (0.002) (0.003) -- (0.004) (0.066) (0.096) --
From net realized
gain on investment
transactions -- -- -- -- -- (0.007) (0.014) --
From paid-in capital -- -- -- -- -- -- -- (0.103)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.200) $(0.236) $(0.396) $(0.360) $(0.389) $(0.440) $(0.490) $(0.436)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $10.240 $10.240 $ 9.980 $ 9.980 $10.080 $ 9.950 $10.050 $10.340
======= ======= ======= ======= ======= ======= ======= =======
Total return(1) 4.63% 5.00% 2.99% 3.84% 5.27% 3.53% 1.86% 7.67%
Ratios/Supplemental
Data**:
Net assets, end of
period (000 omitted) $15,029 $20,147 $25,386 $14,718 $54,241 $73,857 $82,451 $37,124
Ratio of net
expenses to
average daily net
assets(2)(4) 1.73%+ 1.02%+ 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) 1.71%+ 1.00%+ 1.70% 0.89%+ 1.59% -- -- --
Ratio of net
investment income
to average daily
net assets 3.82%+ 4.51%+ 3.91% 4.76%+ 3.81% 3.72% 3.55% 3.77%+
Portfolio Turnover of
the Fund(3) -- -- -- -- -- -- 0% 24%
Portfolio Turnover of
the Portfolio(3) 28% 28% 57% 57% 36% 56% 6% --
** 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) 1.48% 1.72%+
Net investment
income 3.47% 3.38%+
Net investment income
per share $ 0.377 $ 0.299
======= =======
(See footnotes on page 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Connecticut Fund (Class B)
--------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 -----------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994++
- -----------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.790 $ 9.790 $ 9.850 $ 9.870 $ 9.690 $ 9.690 $10.000
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations:
Net investment income $ 0.228 $ 0.207 $ 0.398 $ 0.087 $ 0.379 $ 0.373 $ 0.343
Net realized and
unrealized gain
(loss) on
investments 0.188 0.245 (0.089) (0.082) 0.150 0.026 (0.243)
------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.416 $ 0.452 $ 0.309 $ 0.005 $ 0.529 $ 0.399 $ 0.100
------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.186) $(0.201) $(0.369) $(0.085) $(0.369) $(0.373) $(0.343)
In excess of net
investment income(5) -- (0.021) -- -- -- (0.026) (0.056)
From net realized gain
on investment
transactions -- -- -- -- -- -- (0.011)
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.186) $(0.222) $(0.369) $(0.085) $(0.369) $(0.399) $(0.410)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $10.020 $10.020 $ 9.790 $ 9.790 $ 9.850 $ 9.690 $ 9.690
======= ======= ======= ======= ======= ======= =======
Total return(1) 4.26% 4.64% 3.21% (0.13)% 5.50% 4.27% 0.73%
Ratios/Supplemental
Data**:
Net assets, end of
period (000 omitted) $ 6,066 $ 3,415 $10,227 $ 586 $13,014 $15,613 $14,752
Ratio of net expenses
to average daily net
assets(2)(4) 1.95%+ 1.53%+ 1.72% 0.70%+ 1.53% 1.23% 0.86%+
Ratio of net expenses
to average daily net
assets after
custodian fee
reduction(2) 1.93%+ 1.51%+ 1.68% 0.66%+ 1.49% -- --
Ratio of net
investment income to
average daily net
assets 3.64%+ 3.98%+ 3.93% 5.06%+ 3.78% 3.89% 3.50%+
Portfolio Turnover of
the Portfolio(3) 16% 16% 46% 46% 52% 73% 39%
** 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):
Expense(2) 2.18%+ 1.72%+ 1.96% 0.94%+ 1.86% 1.81% 2.02%+
Expenses after custodian
fee reduction (2) 2.16%+ 1.70%+ 1.92% 0.90%+ -- -- --
Net investment income 3.41%+ 3.79%+ 3.69% 4.82%+ 3.45% 3.31% 2.34%+
Net investment income
per share $ 0.214 $ 0.197 $ 0.374 $ 0.083 $ 0.346 $ 0.317 $ 0.229
======= ======= ======= ======= ======= ======= =======
(See footnotes on page 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Florida Fund (Class B)
----------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ---------------------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- ----------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.980 $ 9.980 $10.170 $10.030 $ 10.080 $ 10.060 $ 10.360 $10.000
------- ------- ------- ------- -------- -------- -------- -------
Income (loss) from
operations:
Net investment income $ 0.168 $ 0.231 $ 0.388 $ 0.357 $ 0.383 $ 0.375 $ 0.387 $ 0.333
Net realized and
unrealized gain (loss)
on investments 0.227 0.201 (0.185) (0.049) 0.096 0.090 (0.200) 0.469
------- ------- ------- ------- -------- -------- -------- -------
Total income from
operations $ 0.395 $ 0.432 $ 0.203 $ 0.308 $ 0.479 $ 0.465 $ 0.187 $ 0.802
------- ------- ------- ------- -------- -------- -------- -------
Less distributions:
From net investment income $(0.195) $(0.232) $(0.388) $(0.357) $ (0.383) $ (0.375) $ (0.387) $(0.333)
In excess of net
investment income(5) -- -- (0.005) (0.001) (0.006) (0.058) (0.092) --
From net realized gain
on investment
transactions -- -- -- -- -- (0.012) (0.008) --
From paid-in capital -- -- -- -- -- -- -- (0.109)
------- ------- ------- ------- -------- -------- -------- -------
Total distributions $(0.195) $ (0.232) $(0.393) $(0.358) $ (0.389) $ (0.445) $ (0.487) $(0.442)
------- ------- ------- ------- -------- -------- -------- -------
Net asset value, end
of period $10.180 $ 10.180 $ 9.980 $ 9.980 $ 10.170 $ 10.080 $ 10.060 $10.360
======= ======== ======= ======= ======== ======== ======== =======
Total return(1) 3.96% 4.34% 2.05% 2.88% 4.78% 4.79% 1.68% 7.94%
Ratios/Supplemental
Data**:
Net assets, end of period
(000 omitted) $25,459 $45,735 $48,418 $34,321 $116,781 $149,581 $162,999 $90,210
Ratio of net expenses to
average daily net
assets(2)(4) 1.64%+ 0.92%+ 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) 1.62%+ 0.90%+ 1.63% 0.87%+ 1.56% -- -- --
Ratio of net investment
income to average
daily net assets 3.87%+ 4.58%+ 3.86% 4.65%+ 3.74% 3.77% 3.57% 3.73%+
Portfolio Turnover of
the Fund(3) -- -- -- -- -- -- 0% 11%
Portfolio Turnover of the
Portfolio(3) 24% 24% 66% 66% 20% 44% 8% --
** 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) 1.49%+
Net investment income 3.48%+
Net investment income per share $ 0.311
=======
(See footnotes on page 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Massachusetts Fund (Class B)
---------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 -----------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- --------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.990 $ 9.990 $10.100 $ 9.940 $ 9.980 $ 9.960 $ 10.270 $10.000
------- ------- ------- ------- ------- -------- -------- -------
Income (loss) from
operations:
Net investment income $ 0.184 $ 0.230 $ 0.378 $ 0.359 $ 0.383 $ 0.383 $ 0.385 $ 0.334
Net realized and
unrealized gain
(loss) on investments 0.248 0.239 (0.106) 0.040+++ 0.126 0.082 (0.197) 0.368
------- ------- ------- ------- ------- -------- -------- -------
Total income from
operations $ 0.432 $ 0.469 $ 0.272 $ 0.399 $ 0.509 $ 0.465 $ 0.188 $ 0.702
------- ------- ------- ------- ------- -------- -------- -------
Less distributions:
From net investment
income $(0.192) $(0.229) $(0.382) $(0.349) $(0.383) $ (0.383) $ (0.385) $(0.334)
In excess of net
investment income(5) -- -- -- -- (0.006) (0.055) (0.095) --
From net realized gain
on investment
transactions -- -- -- -- -- (0.007) (0.018) --
From paid-in capital -- -- -- -- -- -- -- (0.098)
------- ------- ------- ------- ------- -------- -------- -------
Total distributions $(0.192) $(0.229) $(0.382) $(0.349) $(0.389) $ (0.445) $ (0.498) $(0.432)
------- ------- ------- ------- ------- -------- -------- -------
Net asset value, end of
period $10.230 $10.230 $ 9.990 $ 9.990 $10.100 $ 9.980 $ 9.960 $10.270
======= ======= ======= ======= ======= ======== ======== =======
Total return(1) 4.34% 4.72% 2.74% 3.83% 5.08% 4.84% 1.75% 6.95%
Ratios/Supplemental Data**:
Net assets, end of
period (000 omitted) $20,791 $37,041 $41,090 $23,995 $91,809 $113,338 $115,121 $55,737
Ratio of net expenses
to average daily net
assets(2)(4) 1.66%+ 0.98%+ 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) 1.64%+ 0.96%+ 1.66% 0.89%+ 1.58% -- -- --
Ratio of net investment
income to average
daily net assets 3.95%+ 4.62%+ 3.90% 4.76%+ 3.71% 3.89% 3.61% 3.88%+
Portfolio Turnover of the
Fund(3) -- -- -- -- -- -- 2% 21%
Portfolio Turnover of the
Portfolio(3) 26% 26% 60% 60% 27% 46% 8% --
** 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 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Michigan Fund (Class B)
--------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ----------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994++
- ---------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.740 $ 9.740 $ 9.730 $ 9.740 $ 9.630 $ 9.650 $10.000
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations:
Net investment income $ 0.193 $ 0.217 $ 0.382 $ 0.201 $ 0.383 $ 0.364 $ 0.345
Net realized and
unrealized gain (loss)
on investments 0.201 0.213 0.012 0.001 0.090 0.030 (0.279)
------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.394 $ 0.430 $ 0.394 $ 0.202 $ 0.473 $ 0.394 $ 0.066
------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.194) $(0.207) $(0.384) $(0.201) $(0.373) $(0.364) $(0.345)
In excess of net
investment income(5) -- (0.023) -- (0.001) -- (0.050) (0.071)
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.194) $(0.230) $(0.384) $(0.202) $(0.373) $(0.414) $(0.416)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.940 $ 9.940 $ 9.740 $ 9.740 $ 9.730 $ 9.630 $ 9.650
======= ======= ======= ======= ======= ======= =======
Total return(1) 4.06% 4.44% 4.14% 1.89% 4.95% 4.24% 0.37%
Ratios/Supplemental
Data**:
Net assets, end of
period (000 omitted) $ 5,936 $ 5,841 $13,431 $ 406 $18,705 $26,048 $26,788
Ratio of net expenses
to average daily net
assets(2)(4) 2.04%+ 1.59%+ 1.99% 1.18%+ 1.78% 1.55% 0.91%+
Ratio of net expenses
to average daily net
assets after custodian
fee reduction(2) 2.01%+ 1.56%+ 1.96% 1.15%+ 1.75% -- --
Ratio of net investment
income to average
daily net assets 3.78%+ 4.19%+ 3.91% 4.56%+ 3.92% 3.82% 3.56%+
Portfolio Turnover of
the Portfolio(3) 12% 12% 28% 28% 40% 111% 30%
** 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 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
New Jersey Fund (Class B)
----------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ------------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- --------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.070 $10.070 $10.110 $ 9.960 $10.020 $10.030 $10.350 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations:
Net investment income $ 0.177 $ 0.231 $ 0.375 $ 0.362 $ 0.383 $ 0.370 $ 0.374 $ 0.325
Net realized and
unrealized gain
(loss) on investments 0.239 0.221 (0.026) 0.102+++ 0.093 0.068 (0.216)+++ 0.453
------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.416 $ 0.452 $ 0.349 $ 0.464 $ 0.476 $ 0.438 $ 0.158 $ 0.778
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.196) $(0.232) $(0.389) $(0.354) $(0.383) $(0.370) $(0.374) $(0.325)
In excess of net
investment income(5) -- -- -- -- (0.003) (0.060) (0.092) --
From net realized gain
on investment
transactions -- -- -- -- -- (0.018) (0.012) --
From paid-in capital -- -- -- -- -- -- -- (0.103)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.196) $(0.232) $(0.389) $(0.354) $(0.386) $(0.448) $(0.478) $(0.428)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $10.290 $10.290 $10.070 $10.070 $10.110 $10.020 $10.030 $10.350
======= ======= ======= ======= ======= ======= ======= =======
Total return(1) 4.14% 4.52% 3.53% 4.48% 4.79% 4.53% 1.44% 7.71%
Ratios/Supplemental Data**:
Net assets, end of
period (000 omitted) $19,030 $30,700 $34,691 $22,230 $78,039 $93,361 $99,743 $58,527
Ratio of net expenses
to average daily net
assets(2)(4) 1.66%+ 1.03%+ 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%+ 1.03%+ 1.66% 0.85%+ 1.58% -- -- --
Ratio of net
investment
income to
average daily
net assets 3.94%+ 4.58%+ 3.90% 4.75%+ 3.77% 3.73% 3.50% 3.71%+
Portfolio Turnover of
the Fund(3) -- -- -- -- -- -- 0% 9%
Portfolio Turnover of
the Portfolio(3) 15% 15% 37% 37% 42% 44% 10% --
** 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 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
New York Fund (Class B)
---------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ----------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- -----------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.040 $10.040 $10.150 $10.000 $10.030 $10.040 $10.360 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations:
Net investment income $ 0.173 $ 0.232 $ 0.387 $ 0.357 $ 0.374 $ 0.378 $ 0.387 $ 0.327
Net realized and
unrealized gain
(loss) on
investments 0.382 0.359 (0.109) 0.035+++ 0.135 0.049 (0.219) 0.475
------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.555 $ 0.591 $ 0.278 $ 0.392 $ 0.509 $ 0.427 $ 0.168 $ 0.802
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.195) $(0.231) $(0.387) $(0.352) $(0.374) $(0.378) $(0.387) $(0.327)
In excess of net
investment income(5) -- -- (0.001) -- (0.015) (0.055) (0.093) --
From net realized gain
on investment
transactions -- -- -- -- -- (0.004) (0.008) --
From paid-in capital -- -- -- -- -- -- -- (0.115)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.195) $(0.231) $(0.388) $(0.352) $(0.389) $(0.437) $(0.488) $(0.442)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $10.400 $10.400 $10.040 $10.040 $10.150 $10.030 $10.040 $10.360
======= ======= ======= ======= ======= ======= ======= =======
Total return(1) 5.55% 5.93% 2.79% 3.74% 5.12% 4.41% 1.46% 7.95%
Ratios/Supplemental Data**:
Net assets, end of
period (000 omitted) $32,021 $50,880 $60,097 $35,932 $133,846 $166,691 $178,251 $93,819
Ratio of net expenses
to average daily net
assets(2)(4) 1.61%+ 0.95%+ 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%+ 0.95%+ 1.61% 0.86%+ 1.55% -- -- --
Ratio of investment
income to average
daily net assets 3.89%+ 4.56%+ 3.84% 4.67%+ 3.66% 3.81% 3.56% 3.69%+
Portfolio Turnover of
the Fund(3) -- -- -- -- -- -- -- 11%
Portfolio Turnover of
the Portfolio(3) 31% 31% 58% 58% 32% 31% 5% --
** 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 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ohio Fund (Class B)
-------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 ---------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994++
- ---------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.820 $ 9.820 $ 9.840 $ 9.860 $ 9.730 $ 9.730 $10.000
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations:
Net investment income $ 0.245 $ 0.232 $ 0.408 $ 0.205 $ 0.398 $ 0.382 $ 0.354
Net realized and
unrealized gain (loss)
on investments 0.215 0.265 (0.033) (0.037) 0.085 0.032 (0.194)
------- ------- ------- ------- ------- ------- -------
Total income
from operations $ 0.460 $ 0.497 $ 0.375 $ 0.168 $ 0.483 $ 0.414 $ 0.160
------- ------- ------- ------- ------- ------- -------
Less distributions:
From net
investment income $(0.200) $(0.237) $(0.395) $(0.205) $(0.373) $(0.382) $(0.354)
------- ------- ------- ------- ------- ------- -------
In excess of net
investment income(5) -- -- -- (0.003) -- (0.032) (0.076)
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.200) $(0.237) $(0.395) $(0.208) $(0.373) $(0.414) $(0.430)
------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $10.080 $10.080 $ 9.820 $ 9.820 $ 9.840 $ 9.730 $ 9.730
======= ======= ======= ======= ======= ======= =======
Total return(1) 4.72% 5.09% 3.89% 1.51% 5.07% 4.41% 1.23%
Ratios/Supplemental Data**:
Net assets, end of
period (000 omitted) $12,956 $11,272 $24,587 $ 952 $29,759 $34,279 $32,002
Ratio of net
expenses to
average daily
net assets(2)(4) 1.81%+ 1.28%+ 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%+ 1.28%+ 1.81% 1.05%+ 1.65% -- --
Ratio of investment
income to average
daily net assets 3.95%+ 4.48%+ 4.06% 4.75%+ 4.04% 3.95% 3.53%+
Portfolio Turnover of
the Portfolio (3) 17% 17% 34% 34% 47% 120% 33%
** 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 13)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Pennsylvania Fund (Class B)
-------------------------------------------------------------------------------------------------
Six Months Ended Year Ended March 31,
September 30, 1997 -------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993++
- ------------------------------------------------------------------------------------------------------------------------------
Class I Class II Class I Class II*
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.100 $10.100 $10.190 $10.030 $10.090 $10.100 $10.390 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations:
Net investment income $ 0.186 $ 0.240 $ 0.392 $ 0.371 $ 0.388 $ 0.374 $ 0.399 $ 0.336
Net realized and
unrealized gain
(loss) on investments 0.336 0.319 (0.081) 0.063+++ 0.110 0.065 (0.195) 0.490
------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.522 $ 0.559 $ 0.311 $ 0.434 $ 0.498 $ 0.439 $ 0.204 $ 0.826
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.202) $(0.239) $(0.401) $(0.364) $(0.388) $(0.374) $(0.399) $(0.336)
In excess of net
investment income(5) -- -- -- -- (0.010) (0.069) (0.083) --
------- ------- ------- ------- ------- ------- ------- -------
From net realized gain
on investment
transactions -- -- -- -- -- (0.006) (0.012) --
In excess of net
realized gain on
investment transactions -- -- -- -- -- -- -- (0.100)
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.202) $(0.239) $(0.401) $(0.364) $(0.398) $(0.449) $(0.494) $(0.436)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $10.420 $10.420 $10.100 $10.100 $10.190 $10.090 $10.100 $10.390
======= ======= ======= ======= ======= ======= ======= =======
Total return(1) 5.19% 5.57% 3.12% 4.15% 4.98% 4.50% 1.89% 8.19%
Ratios/Supplemental Data**:
Net assets, end of
period (000 omitted) $19,257 $36,349 $33,971 $27,907 $84,407 $103,553 $109,515 $65,005
Ratio of net expenses
to average daily net
assets(2)(4) 1.70%+ 1.00%+ 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) 1.68%+ 0.98%+ 1.67% 0.88%+ 1.60% -- -- --
Ratio of investment
income to average
daily net assets 4.00%+ 4.70%+ 4.05% 4.83%+ 3.79% 3.75% 3.63% 3.88%+
Portfolio Turnover of the
Fund(3) -- -- -- -- -- -- 0% 18%
Portfolio Turnover of the
Portfolio(3) 29% 29% 51% 51% 24% 39% 12% --
** 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 Pennsy lvania 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 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 of the Fund represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The Portfolio Turnover of the Portfolio represents the period when the Fund began
investing in the Portfolio as follows: April 16, 1993 for the Connecticut, Michigan and Ohio Portfolios; and May 3, 1993 for
the California, Florida, Massachusetts, New Jersey, New York and Pennsylvania Portfolios.
(4) The expense ratios for the year ended March 31, 1996 and thereafter have been adjusted to reflect a change in reporting guide
lines. 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
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.
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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").
EATON VANCE 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/
IBCA ("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 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 or as the substitute for the purchase of securities. 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. Under
regulations of the Commodity Futures Trading Commission, the use of futures
transactions for non-hedging purposes is limited. 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 multiple classes,
including Class A, Class B and Class C shares. Each Class represents an
interest in a Fund, but is subject to different expenses, rights and
privileges. See "Distribution and Service Plans" and "How to Buy 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, shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem 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 of a Fund will be voted together except that only
shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of a Fund, shareholders of each
Class are entitled to share pro rata in the net assets attributable to the
Class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Trustees believe
that the structure may offer opportunities for growth in the assets of the
Portfolios, may afford the potential for economies of scale for each Fund 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 or Class 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 may invest in its
corresponding Portfolio. 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 or class might become liable for a misstatement or
omission in this Prospectus regarding another Fund or class 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
- -------------------------------------------------------------------------------
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%
(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
APPROXIMATELY $22 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, the Florida and
Massachusetts Portfolios since May 1, 1997, and the New York Portfolio since
November 24, 1997. Mr. Ahern manages other Eaton Vance Portfolios and is a
Vice President of Eaton Vance and BMR.
Timothy T. Browse has acted as the portfolio manager of the Pennsylvania
Portfolio since May 1, 1997. He manages other Eaton Vance portfolios and is a
Vice President of Eaton Vance and of BMR.
Cynthia J. Clemson has acted as the portfolio manager of the California
Portfolio since May 1, 1997. Ms. Clemson manages other Eaton Vance Portfolios
and is a Vice President of Eaton Vance and BMR.
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.
Like most mutual funds, the Fund and the Portfolio rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Fund and Portfolio that they are also taking steps to address
the issue. There can, however, be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders.
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 AND SERVICE PLANS
The Trust has adopted a Service Plan (the "Class A Plan") for each Fund's
Class A shares that is designed to meet the service fee requirements of the
sales charge rule of the National Association of Securities Dealers, Inc. THE
CLASS A PLAN PROVIDES THAT CLASS A 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 ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL
YEAR. The Trustees of the Trust have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .15% of its
average daily net assets for any fiscal year which is based on the value of
Class A shares sold by such persons and remaining outstanding for at least
twelve months. However, the Class A Plan authorizes the Trustees of the Trust
to increase payments without action by Class A shareholders of any Fund,
provided that the aggregate amount of payments made in any fiscal year does
not exceed .25% of average daily net assets. For the fiscal year ended March
31, 1997, each Class A (formerly Class II) paid or accrued service fees as
follows (as an annualized percentage of average daily net assets): California
Class A (0.008%); Connecticut Class A (0%); Florida Class A (0.011%);
Massachusetts Class A (0.012%); Michigan Class A (0%); New Jersey Class A
(0.013%); New York Class A (0.010%); Ohio Class A (0.0%); and Pennsylvania
Class A (0.011%).
The Trust has also adopted compensation-type Distribution Plans ("Class B
Plan" and "Class C Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("1940 Act") for each Fund's Class B and Class C shares. Each Plan
is designed to permit an investor to purchase shares through an Authorized
Firm without incurring an initial sales charge and at the same time permit the
Principal Underwriter to compensate Authorized Firms in connection therewith.
UNDER SUCH PLANS, CLASS B AND CLASS C EACH PAYS THE PRINCIPAL UNDERWRITER A
FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT EXCEEDING .75% OF
ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF ITS SHARES. Such
fees compensate the Principal Underwriter for sales commissions paid by it to
Authorized Firms on the sale of Class B and Class C shares and for interest
expenses. Under the Class B Plan, 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 B shares sold by such Firms. Under the Class C Plan, 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 Class C shares sold by such Firm and remaining outstanding for at
least one year. During the first year after a purchase of Class C shares, the
Principal Underwriter will retain the sales commission as reimbursement for
the sales commissions paid to Authorized Firms at the time of sale. CDSCs paid
to the Principal Underwriter will be used to reduce amounts owed to it.
Because payments to the Principal Underwriter under the two Plans are limited,
uncovered distribution charges (sales commissions due the Principal
Underwriter plus interest, less CDSCs received by it) may exist indefinitely.
During the fiscal year ended March 31, 1997, Class B (formerly Class I) paid
or accrued sales commissions equivalent to .75% of average daily net assets
attributable to Class B shares for such year. As at March 31, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter on
such day calculated under the Class B Plan amounted to approximately $331,700
(equivalent to 1.3% of net assets on such day) in the case of the California
Class B, $235,800 (equivalent to 2.3% of net assets on such day) in the case
of the Connecticut Class B, $714,000 (equivalent to 1.5% of net assets on such
day) in the case of the Florida Class B, $475,700 (equivalent to 1.2% of net
assets on such day) in the case of the Massachusetts Class B, $330,900
(equivalent to 2.5% of net assets on such day) in the case of the Michigan
Class B, $444,900 (equivalent to 1.3% of net assets on such day) in the case
of the New Jersey Class B, $680,400 (equivalent to 1.1% of net assets on such
day) in the case of the New York Class B, $505,100 (equivalent to 2.1% of net
assets on such day) in the case of the Ohio Class B, and $348,000 (equivalent
to 1.0% of net assets on such day) in the case of the Pennsylvania Class B.
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS
IN AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL
SERVICES, AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Trustees of the
Trust have initially implemented this provision of each Plan by authorizing
each Class to make quarterly service fee payments to the Principal Underwriter
and Authorized Firms in amounts not expected to exceed .15% of the average
daily net assets for any fiscal year. However, each Plan authorizes the
Trustees of the Trust to increase without action by a Class's shareholders,
provided that the aggregate amount of payments made in any fiscal year does
not exceed .25% of average daily net assets. Under the Class B Plan, this fee
is paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. Under the Class
C Plan, 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 Class C shares
sold by such Firm, and (b) monthly service fees approximately equivalent to
1/12 of .15% of the value of Class C shares sold by such Firm and remaining
outstanding for at least one year. During the first year after a purchase of
Class C 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 Class B (formerly
Class I) paid or accrued service fees as follows (as an annualized percentage
of average daily net assets): California Class B (0.15%); Connecticut Class B
(0.13%); Florida Class B (0.15%); Massachusetts Class B (0.15%); Michigan
Class B (0.15%); New Jersey Class B (0.15%); New York Class B (0.14%); Ohio
Class B (0.15%); and Pennsylvania Class B (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 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 Principal Underwriter may at times allow
discounts on the sale of Class A shares 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 Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of a
Fund or class, the investment climate and market conditions, the volume of
sales and redemptions of shares, and, in the case of Class B shares, the
amount of uncovered distribution charges of the Principal Underwriter. The
Plans may continue in effect and payments may be made under the Plans
following any such suspension, discontinuance or limitation of the offering of
shares; however, there is no contractual obligation to continue any Plans for
any particular period of time. Suspension of the offering of shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING 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 Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT") (as agent for the Trust), in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of each Fund's total assets, less its
liabilities, by the number of shares of that class outstanding. Because each
Fund invests its assets in an interest in its corresponding Portfolio, each
Class's net asset value will reflect the value of each Fund's 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 by a specific time each day to receive that day's public offering
price per share. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter. The Trust has approved the acceptance
of purchase and redemption orders as of the time of their receipt by certain
Authorized Firms (or their designated intermediaries).
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) 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 SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
SHARES OF A FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per
share plus the applicable sales charge. The sales charge is divided between
the Authorized Firm and the Principal Underwriter. Class B and Class C shares
are purchased 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 Trust 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 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 Trust'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 B shares held for the longer of (i) four years or
(ii) the time at which the CDSC applicable to such shares expires (the
"holding period") will automatically convert to Class A 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 B shares which the shareholder elects to reinvest in Class B
shares will be considered to be held in a separate sub-account. Upon the
conversion of Class B shares not acquired through the reinvestment of
distributions, a pro rata portion of the Class B shares held in the sub-
account will also convert to Class A shares. This portion will be determined
by the ratio that the Class B shares being converted bears to the total of
Class A 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 A SHARES. The sales charge may vary depending on the size of the
purchase and the number of Class A 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.
The current sales charges and dealer commissions are:
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------------
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
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 0.50% will be imposed on such investments (as
described below) in the event of certain redemptions within 12 months of
purchase.
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolios; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of 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. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with a Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or other
fee for their services; clients of such investment advisors, financial
planners or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of the broker
or agent; and retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code") and "rabbi trusts."
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 in Class A shares, 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
such 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.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through 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: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance [State name]
Investors Bank & Trust Company Limited Maturity Municipals
For A/C Eaton Vance [State name] Fund (and Class)
Limited Maturity Municipals Physical Securities Processing
Fund (and Class) Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the
right to reject any securities. Exchanging securities for shares may create a
taxable gain or loss. Each investor should consult his or her tax adviser with
respect to the particular federal, State and local tax consequences of
exchanging securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
A SHAREHOLDER MAY REDEEM 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 share next computed after a redemption request is received in
the proper form as described below. Within seven days after receipt of a
redemption request in good order by the Transfer Agent, the Trust 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 CDSC (described
below) and any federal income tax required to be withheld.
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 Trust, 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 order is
deemed to be received by the Trust or the Principal Underwriter, as the
Trust's agent. 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.
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of a Fund, either totally or partially, by
a distribution in kind of readily marketable securities withdrawn from its
corresponding Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
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 shares. No CDSC will be imposed with respect to such involuntary
redemptions.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net
asset value at the time of purchase or the time of redemption. Shares acquired
through the reinvestment of distributions are exempt. Redemptions are made
first from shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange,
the shares are deemed to have been acquired at the time of the original
purchase of the exchanged shares and, in the case of Class B shares, the CDSC
schedule applicable to the exchanged shares will apply to the acquired shares.
No CDSC is imposed on shares sold to Eaton Vance or its affiliates, or to
their respective employees or clients. Shares acquired as the result of a
merger or liquidation of another Eaton Vance sponsored fund generally will be
subject to the same CDSC rate imposed by the prior fund.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount is $1 million or more, they will be subject to a .50% CDSC if
redeemed within 12 months of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC schedule:
Year of Redemption
After Purchase CDSC
------------------------------------------------------------------
First 3.0%
Second 2.5%
Third 2.0%
Fourth 1.0%
Fifth and following 0.0%
The Class B CDSC is waived for redemptions (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).
CLASS C SHARES. Class C shares will be subject to a 1% CDSC if redeemed
within 12 months of purchase. The Class C CDSC is waived for redemptions
pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder Service").
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 independent accountants. Shortly after the end of
each calendar year, shareholders will be furnished 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 SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of the 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 Class 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
Trust'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 shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the SHARE OPTION until such time as
the shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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 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 Trust and its Transfer Agent. Since the
Trust 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 Trust 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 the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, and Eaton Vance Tax Free Reserves. Class B shares may
also be exchanged for shares of Eaton Vance Prime Rate Reserves, which are
subject to an early withdrawal charge, or shares of Eaton Vance Money Market
Fund, which are subject to a CDSC, and shares of a money market fund sponsored
by an Authorized Firm and approved by the Principal Underwriter (an
"Authorized Firm fund"). Class C shares may also be exchanged for shares of
Eaton Vance Money Market Fund and EV Classic Senior Floating-Rate Fund. Any
such exchange will be made on the basis of the net asset value per share of
each fund/class at the time of the exchange (plus, in the case of an exchange
made within six months of the date of purchase of Class A 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.
Exchanges are subject to any restrictions or qualifications set forth in the
current prospectus of any such fund.
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 Trust 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
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 B shares of
the Fund, see "How to Redeem Shares." The CDSC applicable to the other Class B
shares in the Eaton Vance 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.
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 Trust, 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 TRUST 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 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 and specifying the Class 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 Class 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 $100,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on
Class A shares when the current market value of holdings (shares at current
offering price), plus new purchases, reaches $100,000 or more. Class A 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. For Class B and Class C shares, any such
withdrawals may not exceed in the aggregate 12% annually of the account
balance at the time the plan is established. Such amount will not be subject
to the Class B or Class C CDSC. See "How to Redeem Shares." A minimum deposit
of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional Class A shares would be
disadvantageous because of the sales charge included in such purchase.
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 the same shares
(or for Class A shares in Class A shares of any other Eaton Vance 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 Trust (or by the Trust's Transfer Agent). To
the extent that any shares are sold at a loss and the proceeds are reinvested
in shares (or other shares 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 AND
CLASS-SPECIFIC EXPENSES, WILL BE DECLARED DAILY AS A DISTRIBUTION TO FUND
SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Distributions on Class A and
Class B shares will ordinarily be paid on the fifteenth day of each month or the
next business day thereafter. Distributions on Class C 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, 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
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. 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 Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent a sales
charge is reduced or eliminated in a subsequent acquisition of such 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 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. Tax-exempt distributions
received from a Fund are includable in the tax base for determining the
taxability of social security and railroad retirement benefits.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares is not deductible to the extent it is deemed related to a 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 should consult their tax advisers before purchasing
shares. "Substantial user" is defined in applicable Treasury regulations to
include a "non-exempt person" who regularly uses in trade or business a part
of a facility financed from the proceeds of industrial development bonds and
would likely be interpreted to include private activity bonds issued to
finance similar facilities.
SEE THE APPENDIX TO THIS PROSPECTUS FOR INFORMATION CONCERNING STATE TAXES.
Shareholders should consult their tax advisers concerning the applicability of
State, local or other taxes to an investment.
PERFORMANCE INFORMATION
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share or 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. Average annual total return is determined separately for each Class
by computing the average annual percentage change in value of $1,000 invested
at the maximum public offering price (including maximum sales charge for Class
A shares; net asset value for Class B and Class C shares) for specified
periods assuming reinvestment of all distributions. Total return may be quoted
for the period prior to commencement of operations which would reflect the
Class's total return (or that of its predecessor) adjusted to reflect any
applicable sales charge. 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 also publish annual and cumulative
total return figures from time to time.
Each Fund may also publish total return figures for each Class which do not
take into account any sales charge. Any performance figure which does not take
into account a sales charge would be reduced to the extent such charge is
imposed. Each Fund's performance may be compared in publications to the
performance of various indices and investments for which reliable data is
available and to averages, performance rankings or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results will fluctuate over time,
and any presentation of yield or total return for any prior period should not
be considered a representation of what an investment may earn or what the
yield or total return may be in any future period. If the expenses are
allocated to Eaton Vance, 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 35% of its net
assets in obligations issued by the governments of Puerto Rico, Guam and the
U.S. Virgin Islands (the "U.S. Territories"). Set forth below is certain
economic and tax information concerning the States in which the Portfolios
invest and the U.S. Territories.
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 1997-1998 Budget Act allocated a State budget of some
$66.9 billion. The Budget Act contains no tax increases and no tax reductions.
Nonetheless, the State's budget continues 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 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 income tax imposed 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.
For fiscal year 1997-98, the estimated total funds available to the State are
reported to be $42 billion. The estimated General Revenue plus Working Capital
and Budget Stabilization Fund appropriations at July 1997 are estimated at
$17.114 billion with unencumbered reserves at the end of fiscal year 1997-98
estimated at $1.036 billion. For fiscal year 1997-98, the estimated General
Revenue plus Working Capital and Budget Stabilization funds are projected to
be $19.11 billion, a 9% increase over the estimated $16.6 billion available in
fiscal year 1996-97. The Florida and United States unemployment rates for 1996
were 5.05% and 5.4%, respectively. Unemployment figures at the end of the
third quarter 1997 showed U.S. unemployment rates hitting a 24 year low of
4.7%, with the average Florida unemployment rate for the year holding steady
at 4.88%.
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 Aa2 and AA+ by Moody's and S&P,
respectively.
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 recovered from the
economic slowdown of the early 1990's, and has experienced shifts in
employment from labor-intensive manufacturing industries to finance,
technology and service-based industries. The unemployment rate was 3.7% for
October 1997 as compared to January 1997, when the unemployment rate was 4.0%.
The national unemployment rate in October 1997 was 4.4%.
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 235,000 jobs since late 1994, 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 upgraded the bonds from A- in August 1997. 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.
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. The unemployment rate for October 1997 was 4.0% as
compared to the national average of 4.4%.
General obligations of Ohio are rated AA+, Aa1 and AA+ by S&P, Moody's and
Fitch, 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.
THE U.S. TERRITORIES. 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.
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 of the U.S. Virgin Islands 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, which has had a negative impact on
revenue collections
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.
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. There is
currently no rated, unenhanced Virgin Islands debt outstanding (although there
is unrated debt outstanding). Guam's general obligation debt is rated BBB by
S&P with a negative outlook.
<PAGE>
Investing
[GRAPHIC OMITTED] for the
21st
Century
- -------------------------------------------------------------------------------
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
PROSPECTUS
APRIL 1, 1998
- -------------------------------------------------------------------------------
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
LTDP4/1
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Investing
[GRAPHIC OMITTED] for the
21st
Century
Eaton Vance National
Limited Maturity Municipals Fund
EATON VANCE 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 April 1, 1998 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.
CONTENTS
<TABLE>
<CAPTION>
Page Page
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 10
The Fund's Financial Highlights 3 How to Redeem Shares 12
The Fund's Investment Objective 4 Reports to Shareholders 13
Investment Policies and Risks 4 The Lifetime Investing Account/Distribution Options 14
Organization of the Fund and the Portfolio 6 The Eaton Vance Exchange Privilege 14
Management of the Fund and the Portfolio 7 Eaton Vance Shareholder Services 15
Distribution and Service Plans 9 Distributions and Taxes 16
Valuing Shares 10 Performance Information 17
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated April 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 2.25% None None
Sales Charges Imposed on Reinvested
Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 3.00% 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------------
Investment Adviser Fee 0.48% 0.48% 0.48%
Rule 12b-1 Distribution and/or
Service Fees 0.14 0.90 0.90
Other Expenses 0.29 0.29 0.29
---- ---- ----
Total Operating Expenses 0.91% 1.67% 1.67%
==== ==== ====
EXAMPLE
An investor would pay the following expenses and, in the case of Class
A shares, maximum initial sales charge or, in the case of Class B and
Class C shares, the applicable contingent deferred sales charge on a
$1,000 investment, assuming (a) 5% annual return and (b) redemption at
the end of each period:
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
1 Year $ 32 $ 47 $ 27
3 Years 51 73 53
5 Years 72 81 91
10 Years 132 136 198
An investor would pay the following expenses on the same investment,
assuming (a) 5% annual return and (b) no redemptions:
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
1 Year $ 32 $ 17 $ 17
3 Years 51 53 53
5 Years 72 81 91
10 Years 132 136 198
NOTES: The table and Example summarize the aggregate expenses of the Portfolio
and each Class of shares of the Fund and are designed to help investors
understand the costs and expenses they will bear, directly or indirectly, by
investing in the Fund. Information for Class B shares is based on its expenses
for the most recent fiscal year. Information for Class A and Class C shares is
estimated based upon the most recent fiscal year of its predecessor fund
adjusted for the multiple-class structure. Class B shares convert to Class A
shares approximately four years after purchase, therefore the Example for 5
years and 10 years reflects Class A expenses. See "How to Buy Shares --
Conversion Feature."
The Fund offers three classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at
the time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge ("CDSC") of 0.50% will be imposed
on such invetments in the event of certain redemptions within 12 months of
purchase. Class B shares are sold subject to a declining CDSC (3% maximum) if
redeemed within four years of purchase and Class C shares are sold subject to
a 1% CDSC if redeemed within one year of purchase. The CDSC does not apply in
certain circumstances. See "How to Buy Shares" and "How to Redeem Shares."
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. Long-term holders of Class B and Class C shares 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.
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" "Distribution and Service Plans," and "How to Redeem 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 8.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees may invest in the Portfolio in
the future. See "Organization of the Fund and the Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the financial
statements that appear in the Fund's semi-annual and annual reports to
shareholders. The Fund's annual financial statements have been audited by
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing. The annual financial statements and the independent
auditors' report and the unaudited semi-annual financial statements are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in its
annual and semi-annual reports to shareholders which may be obtained without
charge by contacting the Principal Underwriter. The financial information for
each of the periods presented in the Fund's Financial Highlights is for Class
I and Class II shares of the Fund prior to reclassification as Class B and
Class A shares, respectively, on April 1, 1998. Information for Class C
shares is not presented because that class did not exist prior to April 1,
1998. The Financial Highlights for Class C shares will differ from the
Financial Highlights presented below due to the different fees imposed on
Class C shares.
<TABLE>
<CAPTION>
Six Months Ended
September 30, 1997 Year Ended
(Unaudited) March 31, 1997 Year Ended March 31,
--------------------- ----------------------- ------------------------------------------------
Class I Class II Class I Class II** 1996 1995 1994 1993***
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $10.070 $10.070 $10.170 $10.030 $10.130 $10.160 $10.450 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income from operations:
Net investment income $ 0.215 $ 0.260 $ 0.428 $ 0.393 $ 0.413 $ 0.400 $ 0.406 $ 0.339
Net realized and
unrealized gain
(loss) on
investments 0.272 0.263 (0.098) 0.033++ 0.040 0.033 (0.178) 0.573
------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.487 $ 0.523 $ 0.330 $ 0.426 $ 0.453 $ 0.433 $ 0.228 $ 0.912
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $(0.217) $(0.253) $(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 $(0.217) $(0.253) $(0.430) $(0.386) $(0.413) $(0.463) $(0.518) $(0.462)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
year $10.340 $10.340 $10.070 $10.070 $10.170 $10.130 $10.160 $10.450
======= ======= ======= ======= ======= ======= ======= =======
Total Return(1) 4.86% 5.23% 3.30% 4.06% 4.51% 4.43% 2.10% 9.05%
Ratios/Supplemental Data*:
Net assets, end of
year (000 omitted) $28,511 $49,728 $48,692 $37,072 $112,027 $141,289 $151,787 $89,878
Ratio of net expenses
to average daily
net assets(2)(4) 1.72%+ 1.00%+ 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) 1.71%+ 0.99%+ 1.67% 0.97%+ 1.63% -- -- --
Ratio of net
investment income
to average daily
net assets 4.42%+ 5.13%+ 4.37% 5.14%+ 4.04% 3.99% 3.78% 3.68%+
Portfolio Turnover of
the Fund(3) -- -- -- -- -- -- -- 51%
Portfolio Turnover of
the Portfolio(3) 25% 25% 68% 68% 68% 56% 21% --
* 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) 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 of the Portfolio represents the period when the Fund began investing in the Portfolio
on May 3, 1993.
(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>
<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 by
Fitch/IBCA ("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. 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. 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.
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 or as a substitute for the purchase of securities. 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. Under regulations of the Commodity Futures Trading Commission the use
of futures transactions for non-hedging purposes is limited. 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
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 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 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 multiple classes, including Class A, Class
B and Class C shares. Each Class represents an interest in the Fund, but is
subject to different expenses, rights and privileges. See "Distribution and
Service Plans" and "How to Buy Shares -- Conversion Feature". The Trustees
have the authority under the Declaration of Trust to create additional classes
of shares with differing rights and privileges.
When issued and outstanding, the shares are fully paid and nonassessable by
the Trust and redeemable as described under "How to Redeem 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 of the Fund will be voted together
except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure may offer opportunities for growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund 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 or class 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 may invest in the Portfolio. 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 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:
Annual Daily
Category Daily Net Assets Asset Rate Income Rate
- ------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275 2.75
3 $1 billion but less than $1.5 billion 0.250 2.50
4 $1.5 billion but less than $2 billion 0.225 2.25
5 $2 billion but less than $3 billion 0.200 2.00
6 $3 billion and over 0.175 1.75
As at 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
APPROXIMATELY $22 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. Mr. Ahern manages other Eaton Vance portfolios and is a
Vice President of Eaton Vance and BMR.
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.
Like most mututal funds, the Fund and the Portfolio rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Fund and Portfolio that they are also taking steps to address
the issue. There can, however, be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders.
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 AND SERVICE PLANS
The Trust has adopted a Service Plan (the "Class A Plan") for the Fund's Class
A shares that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. THE CLASS
A PLAN PROVIDES THAT CLASS A 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 ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL
YEAR. The Trustees of the Trust have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .15% of its
average daily net assets for any fiscal year which is based on the value of
Class A shares sold by such persons and remaining outstanding for at least
twelve months. However, the Class A Plan authorizes the Trustees of the Trust
to increase payments without action by Class A shareholders of the Fund,
provided that the aggregate amount of payments made in any fiscal year does
not exceed .25% of average daily net assets. During the fiscal year ended
March 31, 1997, Class A (formerly Class II) paid or accrued service fees under
its Plan equivalent to .15% of average daily net assets for such year.
The Trust has also adopted compensation-type Distribution Plans (the "Class B
Plan" and "Class C Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") for the Fund's Class B and Class C shares. Each
Plan is designed to permit an investor to purchase shares through an
Authorized Firm without incurring an initial sales charge and at the same time
permit the Principal Underwriter to compensate Authorized Firms in connection
therewith. UNDER SUCH PLANS, CLASS B AND CLASS C EACH PAYS THE PRINCIPAL
UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT
EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF
ITS SHARES. Such fees compensate the Principal Underwriter for sales
commissions paid by it to Authorized Firms on the sale of Class B and Class C
shares and for interest expenses. Under the Class B Plan, 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 B shares sold by such Firms. Under
the Class C Plan, 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
Class C shares sold by such Firm, and (b) monthly sales commissions
approximately equivalent to 1/12 of .75% of the value of Class C shares sold
by such Firm and remaining outstanding for at least one year. During the first
year after a purchase of Class C shares, the Principal Underwriter will retain
the sales commission as reimbursement for the sales commissions paid to
Authorized Firms at the time of sale. CDSCs paid to the Principal Underwriter
will be used to reduce amounts owed to it. Because payments to the Principal
Underwriter under the two Plans are limited, uncovered distribution charges
(sales commissions due the Principal Underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. During the fiscal year
ended March 31, 1997, Class B (formerly Class I) paid sales commissions
equivalent to .75% of average daily net assets. As at March 31, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter on
such day calculated under the Class B Plan amounted to approximately $542,000
(equivalent to 1.1% of net assets on such day).
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS
IN AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL
SERVICES, AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Trustees of the
Trust have initially implemented this provision of each Plan by authorizing
each Class to make quarterly service fee payments to the Principal Underwriter
and Authorized Firms in amounts not expected to exceed .15% of average
daily net assets for any fiscal year. However, each Plan authorizes the
Trustees of the Trust to increase payments without action by a Class's
shareholders, provided that the aggregate amount of payments made in any
fiscal year does not exceed .25% of average daily net assets. Under the Class
B Plan, this fee is paid quarterly in arrears based on the value of Class B
shares sold by such persons and remaining outstanding for at least twelve
months. Under the Class C Plan, 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 Class C shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .15% of the value of Class C shares sold
by such Firm and remaining outstanding for at least one year. During the first
year after a purchase of Class C 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, Class B (formerly Class I) paid or accrued service fees under its Plan
equivalent to .15% of 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 Principal Underwriter may at times allow
discounts on the sale of Class A shares 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 Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of its shares at any time. In
determining whether any such action should be taken, the Trust's management
intends to consider all relevant factors, including (without limitation) the
size of the Fund or class, the investment climate and market conditions, the
volume of sales and redemptions of shares, and, in the case of Class B and
Class C shares, the amount of uncovered distribution charges of the Principal
Underwriter. The Plans may continue in effect and payments may be made under
the Plans following any such suspension, discontinuance or limitation of the
offering of shares; however, there is no contractual obligation to continue
any Plan for any particular period of time. Suspension of the offering of
shares would not, of course, affect a shareholder's ability to redeem shares.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE 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 Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of the Fund's total assets, less its
liabilities, by the number of shares of that Class outstanding. Because the
Fund invests its assets in an interest in the Portfolio, each Class's net
asset value will reflect the value of the Fund's 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 by a specific time each day to receive that day's public offering
price per share. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter. The Fund has approved the acceptance of
purchase and redemption orders as of the time of their receipt by certain
Authorized Firms (or their designated intermediaries).
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) 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 SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR ACCEPTABLE SECURITIES. Class A shares are purchased at the effective
public offering price, which price is based on the effective net asset value
per share plus the applicable sales charge. The sales charge is divided
between the Authorized Firm and the Principal Underwriter. Class B and Class C
shares are purchased at the net asset value per share 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 Trust may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment 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 Trust'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 B 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 A
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 B shares which the shareholder elects to reinvest
in Class B shares will be considered to be held in a separate sub-account.
Upon the conversion of Class B shares not acquired through the reinvestment of
distributions, a pro rata portion of the Class B shares held in the sub-
account will also convert to Class A shares. This portion will be determined
by the ratio that the Class B shares being converted bear to the total of
Class B 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 A SHARES. The sales charge may vary depending on the size of the
purchase and the number of Class A 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.
The current sales charges and dealer commissions are:
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------------
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
* No sales charge is payable at the time of purchase on investments of
$1 million or more 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 CDSC of 0.50% will be imposed on such
investments (as described below) in the event of certain redemptions
within 12 months of purchase.
Class A shares 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 and 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. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with 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 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".
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 in Class A shares, 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
such 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.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities, but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through 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: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance National
Investors Bank & Trust Company Limited Maturity Municipals
For A/C Eaton Vance National Limited Fund (state Class)
Maturity Municipals Fund Physical Securities Processing
(state Class) Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the
right to reject any securities. Exchanging securities for shares may create a
taxable gain or loss. Each investor should consult his or her tax adviser with
respect to the particular federal, state and local tax consequences of
exchanging securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
A SHAREHOLDER MAY REDEEM 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 share next computed after a redemption request is received in
the proper form as described below. Within seven days after receipt of a
redemption request in good order by the Transfer Agent, the Trust 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 CDSC (described
below) and any federal income tax required to be withheld.
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 Trust, 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 order is
deemed to be received by the Trust or the Principal Underwriter, as the
Trust's agent. 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.
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
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 if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net
asset value at the time of purchase or the time of redemption. Shares acquired
through the reinvestment of distributions are exempt. Redemptions are made
first from shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange,
the shares are deemed to have been acquired at the time of the original
purchase of the exchanged shares and, in the case of Class B shares, the CDSC
schedule applicable to the exchanged shares will apply to the acquired shares.
No CDSC is imposed on shares sold to Eaton Vance or its affiliates, or to
their respective employees or clients. Shares acquired as the result of a
merger or liquidation of another Eaton Vance sponsored fund generally will be
subject to the same CDSC rate imposed by the prior fund.
Unless a shareholder specifies otherwise, redemption requests placed by
shareholders who own both Class B and Class A shares will be satisfied first
by redeeming Class B shares that are no longer subject to a CDSC, then by
redeeming Class A shares. If the Class A shares were acquired as the result of
a conversion of certificated Class B shares, the certificate must be returned
to the Transfer Agent before a redemption of such Class A shares can be
processed.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount is $1 million or more they will be subject to a .50% CDSC if
redeemed within 12 months of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC schedule:
Year of Redemption
After Purchase CDSC
- ----------------------------------------------------------------------
First 3.0%
Second 2.5%
Third 2.0%
Fourth 1.0%
Fifth and following 0.0%
The Class B CDSC is waived for redemptions (1) pursuant to a Withdrawal Plan
(see "Eaton Vance Shareholder Services"), (2) as part of a required minimum
distribution from a tax-sheltered retirement plan, or (3) following the death
of all beneficial owners of shares, provided the redemption is requested
within one year of death (a death certificate and other applicable documents
may be required).
CLASS C SHARES. Class C shares will be subject to a 1% CDSC if redeemed within
12 months of purchase. The Class C CDSC is waived for redemptions pursuant to
a Withdrawal Plan (see "Eaton Vance Shareholder Services").
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 independent accountants. Shortly after the end of
each calendar year, shareholders will be furnished 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 SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust 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 Class 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
Trust'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 shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the SHARE OPTION until such time as
the shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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 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 Trust and its Transfer Agent. Since the
Trust 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 Trust 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 the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston and Eaton Vance Tax Free Reserves. Class B shares may
also be exchanged for shares of Eaton Vance Prime Rate Reserves, which are
subject to an early withdrawal charge, shares of Eaton Vance Money Market
Fund, which are subject to a CDSC, and shares of a money market fund sponsored
by an Authorized Firm and approved by the Principal Underwriter (an
"Authorized Firm fund"). Class C shares may also be exchanged for shares of
Eaton Vance Money Market Fund and EV Classic Senior Floating-Rate Fund. Any
such exchange will be made on the basis of the net asset value per share of
each fund/class at the time of the exchange (plus, in the case of an exchange
made within six months of the date of purchase of Class A 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.
Exchanges are subject to any restrictions or qualifications set forth in the
current prospectus of any such fund.
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 Trust 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
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 Class B shares of the Fund and Prime Rate Reserves, see
"How to Redeem Shares". The CDSC schedule applicable to the Class B shares of
the other Eaton Vance 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.
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 Trust, 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 TRUST 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 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 and specifying the Class 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 Class 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 $100,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION. Purchases may qualify for reduced sales charges on
Class A shares when the current market value of holdings (shares at current
offering price), plus new purchases, reaches $100,000 or more. Class A 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. For Class B and Class C shares, any such
withdrawals may not in the aggregate exceed 12% annually of the account
balance at the time the plan is established. Such amount will not be subject
to the Class B or Class C CDSC. See "How to Redeem Shares". A minimum deposit
of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional Class A shares would be
disadvantages because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed shares may reinvest,
with credit for any CDSCs 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 the same shares
(or for Class A shares in Class A shares of any other Eaton Vance 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 Trust (or by the Trust's Transfer Agent). To
the extent that any shares are sold at a loss and the proceeds are reinvested
in shares (or other shares are acquired) within the period beginning 30 days
before and ending 30 days after the date of 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 AND CLASS-SPECIFIC
EXPENSES, WILL BE DECLARED DAILY AS A DISTRIBUTION TO SHAREHOLDERS OF RECORD
AT THE TIME OF DECLARATION. Distributions on Class A and Class B shares, 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. Distributions
on Class C 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, 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 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 Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent a sales
charge is reduced or eliminated in a subsequent acquisition of such 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
taxable net investment income and net short-term capital gain) and net capital
gain that it distributes to 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 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. Tax-exempt distributions
received from the 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 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 should consult their tax advisers before
purchasing shares. "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 their tax advisers concerning the applicability of
state, local or other taxes to an investment.
PERFORMANCE INFORMATION
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share or 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 1 minus the tax
rate. Average annual total return is determined separately for each Class by
computing the average annual percentage change in value of $1,000 invested at
the maximum public offering price (including maximum sales charge for Class A;
net asset value for Class B and Class C) for specified periods, assuming
reinvestment of all distributions. Total return may be quoted for the period
prior to commencement of operations which would reflect the Class's total
return (or that of its predecessor) adjusted to reflect any applicable sales
charge. 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 publish annual and cumulative total return
figures from time to time.
The Fund may also publish total return figures for each Class which do not
take into account any sales charge. Any performance figure which does not take
into account a sales charge would be reduced to the extent such charge is
imposed. 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 investment results will fluctuate over time, and
any presentation of yield or total return for any prior period should not be
considered a representation of what an investment may earn or what the yield
or total return may be in any future period.
<PAGE>
Investing
[GRAPHIC OMITTED] for the
21st
Century
- -------------------------------------------------------------------------------
EATON VANCE NATIONAL LIMITED MATURITY MUNICIPALS FUND
PROSPECTUS
APRIL 1, 1998
- -------------------------------------------------------------------------------
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
LNAP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
April 1, 1998
<TABLE>
EATON VANCE LIMITED MATURITY MUNICIPAL FUNDS
<S> <C>
EATON VANCE CALIFORNIA LIMITED MATURITY MUNICIPALS FUND EATON VANCE NEW JERSEY LIMITED MATURITY MUNICIPALS FUND
EATON VANCE CONNECTICUT LIMITED MATURITY MUNICIPALS FUND EATON VANCE NEW YORK LIMITED MATURITY MUNICIPALS FUND
EATON VANCE FLORIDA LIMITED MATURITY MUNICIPALS FUND EATON VANCE OHIO LIMITED MATURITY MUNICIPALS FUND
EATON VANCE MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND EATON VANCE PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND
EATON VANCE MICHIGAN LIMITED MATURITY MUNICIPALS FUND
</TABLE>
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information
about the Funds listed above and their corresponding Portfolios. This
Statement of Additional Information is sometimes referred to herein as the
"SAI."
TABLE OF CONTENTS
Page
Additional Information About Investment Policies ...................... 1
Investment Restrictions ............................................... 7
Trustees and Officers ................................................. 8
Investment Adviser and Administrator .................................. 10
Custodian ............................................................. 13
Services for Accumulation - Class A Shares ............................ 14
Service for Withdrawal ................................................ 14
Determination of Net Asset Value ...................................... 14
Investment Performance ................................................ 15
Taxes ................................................................. 16
Principal Underwriter ................................................. 18
Service Plan - Class A Shares ......................................... 19
Distribution Plans - Class B and Class C Shares ....................... 20
Portfolio Security Transactions ....................................... 21
Other Information ..................................................... 23
Independent Certified Public Accountants .............................. 25
Financial Statements .................................................. 25
Appendix A: Class A Shares ............................................ a-1
Appendix B: Class B Shares ............................................ b-1
Appendix C: Class C Shares ............................................ c-1
Appendix D: State-Specific Information ................................ d-1
Appendix E: Tax Equivalent Yield Tables ............................... e-1
Appendix F: Description of Securities Ratings ......................... f-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this Statement of Additional Information regarding another Fund
(or Class) 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 APRIL 1, 1998, 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).
This SAI provides information about the Funds and the Portfolios. Capitalized
terms used in this SAI and not otherwise defined have the meanings given them
in the Prospectus. The Funds are subject to the same investment policies as
those of the Portfolio. Each Fund currently seeks to achieve its objective by
investing in its corresponding 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 a Fund derived from such interest) is treated as a tax
preference item which could subject the recipient to or increase the
recipient's liability for the AMT. For corporate shareholders, 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.
Each Portfolio may on occasion acquire revenue bonds which carry warrants
or similar rights covering equity securities. Such warrants or rights may be
held indefinitely, but if exercised, the Portfolio anticipates that it would,
under normal circumstances, dispose of any equity securities so acquired
within a reasonable period of time.
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. Each Portfolio will take whatever action
it considers appropriate in the event of anticipated financial difficulties,
default or bankruptcy of either the issuer of any municipal obligation or of
the underlying source of funds for debt service. Such action may include
retaining the services of various persons or firms (including affiliates of
the Investment Adviser) to evaluate or protect any real estate, facilities or
other assets securing any such obligation or acquired by a Portfolio as a
result of any such event, and a Portfolio may also manage (or engage other
persons to manage) or otherwise deal with any real estate, facilities or other
assets so acquired. The Portfolio anticipates that real estate consulting and
management services may be required with respect to properties securing
various municipal obligations in its portfolio or subsequently acquired by the
Portfolio. The Portfolio will incur additional expenditures in taking
protective action with respect to portfolio obligations in default and assets
securing such obligations.
The yields on municipal obligations will be dependent on a variety of
factors, including purposes of issue and source of funds for repayment,
general money market conditions, general conditions of the municipal bond
market, size of a particular offering, maturity of the obligation and rating
of the issue. The ratings of Moody's, S&P and Fitch represent their opinions
as to the quality of the municipal obligations which they undertake to rate.
It should be emphasized, however, that ratings are based on judgment and are
not absolute standards of quality. Consequently, municipal obligations with
the same maturity, coupon and rating may have different yields while
obligations of the same maturity and coupon with different ratings may have
the same yield. In addition, the market price of 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 a Portfolio's policy of concentrating its investments in
particular State issuers of municipal obligations, see "Risks of
Concentration" in Appendix D.
Obligations of Particular Types of Issuers. Each Portfolio may invest 25% or
more of its total assets in municipal obligations of the same type. There
could be economic, business or political developments which might affect all
municipal obligations of the same type. In particular, investments in
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. Subject to each Fund's investment policies as set
forth in the Prospectus, each Portfolio may invest in the obligations of
Puerto Rico. Accordingly, the Portfolio may be adversely affected by local
political and economic conditions and developments within Puerto Rico
affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Manufacturing is the largest sector in terms of gross
domestic product and is more diversified than during earlier phases of Puerto
Rico's industrial development. 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, has lead to the loss of lower wage jobs such as textiles, but
economic growth in other areas, particularly the high technology area has
compensated for that loss.
The Commonwealth of Puerto Rico 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. Countering the loss of investment tax incentives are the
government's pro-business stance, improvements in education, and privatization
of government-owned businesses. Further, Puerto Rico has taken steps to
increase tax collection through tax code simplification and enforcement.
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 pro-statehood
administration would like to bring the issue to a new vote again in November
1998, though it may be delayed. Sentiment appears marginally in favor of
statehood.
MUNICIPAL LEASES
Each Portfolio may invest in municipal leases and participations therein,
which arrangements frequently involve special risks. Municipal leases are
obligations in the form of a lease or installment purchase arrangement which
is issued by state or local governments to acquire equipment and facilities.
Interest income from such obligations is generally exempt from local and state
taxes in the state of issuance. "Participations" in such leases are undivided
interests in a portion of the total obligation. Participations entitle their
holders to receive a pro rata share of all payments under the lease. 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 each Portfolio may be deemed
illiquid for the purpose of the Portfolio's 15% limitation on investments in
illiquid securities, unless determined by the Investment Adviser, pursuant to
guidelines adopted by the Trustees of a Portfolio, to be liquid securities for
the purpose of such limitation. In determining the liquidity of municipal
lease obligations, the Investment Adviser will consider a variety of factors
including: (1) the willingness of dealers to bid for the security; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the frequency of trades and quotes for the
obligation; and (4) the nature of the marketplace trades. In addition, the
Investment Adviser will consider factors unique to particular lease
obligations affecting the marketability thereof. These include the general
creditworthiness of the municipality, the importance of the property covered
by the lease to the municipality, and the likelihood that the marketability of
the obligation will be maintained throughout the time the obligation is held
by a Portfolio. In the event a Portfolio acquires an unrated municipal lease
obligation, the Investment Adviser will be responsible for determining the
credit quality of such obligation on an on-going basis, including an
assessment of the likelihood that the lease may or may not be cancelled.
ZERO COUPON BONDS
Zero coupon bonds are debt obligations which do not require the periodic
payment of interest and are issued at a significant discount from face value.
The discount approximates the total amount of interest the bonds will accrue
and compound over the period until maturity at a rate of interest reflecting
the market rate of the security at the time of issuance. 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 a 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 a
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
Each 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
Each Portfolio may sell (and later purchase) securities in anticipation of
a market decline (a rise in interest rates) or purchase and later sell
securities in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another purchased at approximately the
same time to take advantage of what a Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such
as changes in the overall demand for or supply of various types of municipal
obligations or changes in the investment objectives of investors. Such trading
may be expected to increase the portfolio turnover rate, which may increase
capital gains and the expenses incurred in connection with such trading. A
Portfolio 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 could occur, for example, if all
the securities held by a Portfolio were replaced once in a period of one year.
A high turnover rate (100% or more) necessarily involves greater expenses to a
Portfolio. Each 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 each
Portfolio, see "Supplementary Data" in the financial statements contained in
the annual report attached hereto.
WHEN-ISSUED SECURITIES
New issues of municipal obligations are sometimes offered on a "when-
issued" basis, that is, delivery and payment for the securities normally take
place within a specified number of days after the date of a Portfolio's
commitment and are subject to certain conditions such as the issuance of
satisfactory legal opinions. Each Portfolio may also purchase securities on a
when-issued basis pursuant to refunding contracts in connection with the
refinancing of an issuer's outstanding indebtedness. Refunding contracts
generally require the issuer to sell and a Portfolio to buy such securities on
a settlement date that could be several months or several years in the future.
Each Portfolio 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. A Portfolio's custodian will segregate
cash or liquid debt securities in a separate account of a 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 a Portfolio's when-
issued commitments. When a Portfolio commits to purchase a security on a when-
issued basis it records the transaction and reflects the value of the security
in determining its net asset value. Securities purchased on a when-issued
basis and the securities held by a Portfolio are subject to changes in value
based upon the perception of the creditworthiness of the issuer and changes in
the level of interest rates (i.e. appreciation when interest rates decline and
depreciation when interest rates rise). Therefore, to the extent that a
Portfolio remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be greater
fluctuations in the Portfolio's net asset value than if it solely set aside
cash to pay for when-issued securities.
FLOATING OR VARIABLE RATE OBLIGATIONS
Each 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. Each
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 a Portfolio may retain the bond if interest rates decline. By
acquiring these kinds of obligations a 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
Each 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.
Each Portfolio intends to limit this type of transaction to institutions (such
as banks or securities dealers) which the Investment Adviser believes present
minimal credit risks and would engage in this type of transaction to
facilitate portfolio liquidity or (if the seller so agrees) to hedge against
rising interest rates. There is no assurance that this kind of put option will
be available to a Portfolio or that selling institutions will be willing to
permit a Portfolio to exercise a put to hedge against rising interest rates. A
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. A Portfolio does not expect to assign
any value to any separate put option which may be acquired to facilitate
portfolio liquidity, inasmuch as the value (if any) of the put will be
reflected in the value assigned to the associated security. Interest income
generated by certain bonds having put or demand features may not qualify as
tax-exempt interest.
SECURITIES LENDING
Each Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by a Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned,
which will be marked to market daily. Cash equivalents include short-term
municipal obligations as well as taxable certificates of deposit, commercial
paper and other short-term money market instruments. A 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, a 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. A 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 a Portfolio's management to be of
good standing and when, in the judgment of a 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 a Fund of any income realized by a Portfolio from securities
loans will be taxable. If the management of a Portfolio decides to make
securities loans, it is intended that the value of the securities loaned would
not exceed 30% of a Portfolio's total assets. A Portfolio has no present
intention of engaging in securities lending.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A change in the level of interest rates may affect the value of the
securities held by a Portfolio (or of securities that a Portfolio expects to
purchase). To hedge against changes in rates or as a substitute for the
purchase of securities, a Portfolio may enter into (i) futures contracts for
the purchase or sale of debt securities, and (ii) futures contracts on
securities indices. All futures contracts entered into by a Portfolio are
traded on exchanges or boards of trade that are licensed and regulated by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant or brokerage firm which is a member of the
relevant exchange. Each Portfolio may purchase and write call and put options
on futures contracts which are traded on a United States 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.
Each Portfolio will engage in futures and related options transactions
only for bona fide hedging purposes or non-hedging purposes as defined in or
permitted by CFTC regulations. The Portfolio will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Portfolio or which it expects to purchase. Each Portfolio will engage in
transactions in futures and related options contracts only to the extent such
transactions are consistent with the requirements of the Code for maintaining
qualification of a Fund as a regulated investment company for federal income
tax purposes (see "Taxes").
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, the lending of Portfolio
securities or futures contracts and options (other than options that a
Portfolio has purchased) expose a Portfolio to an obligation to another party.
A Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or
futures contracts, or (2) cash or liquid securities (such as readily
marketable obligations and money market instruments) with a value sufficient
at all times to cover its potential obligations not covered as provided in (1)
above. Each Portfolio will comply with 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 a Portfolio's assets to
segregated accounts or cover could impede portfolio management or a
Portfolio's ability to meet redemption requests or other current obligations.
SHORT-TERM OBLIGATIONS
Although a 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, a 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 each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of a Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of a Fund. Accordingly, each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
1940 Act;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance
margin in connection with futures contracts or related options transactions is
not considered the purchase of a security on margin;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(4) Purchase or sell real estate (including limited partnership interests
in real estate, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities of companies which invest
or deal in real estate or securities which are secured by real estate);
(5) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, 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.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
The Funds and the Portfolios have also adopted the following investment
policies which may be changed by the Trust with respect to a Fund without
approval by that Fund's shareholders or with respect to the Portfolio without
approval of a Fund or its other investors. As a matter of nonfundamental
policy, the Funds and the Portfolios will not: (a) engage in options, futures
or forward transactions if more than 5% of its net assets, as measured by the
aggregate of the premiums paid by the Fund or the Portfolio, would be so
invested; (b) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short, and unless not more than 25% of
the Fund's net assets (taken at current value) is held as collateral for such
sales at any one time; or (c) invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements maturing in more than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or its delegate, determines to be
liquid.
For purposes of a Portfolio's investment restrictions, the determination
of the "issuer" of a municipal obligation which is not a general obligation
bond will be made by the 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 a Fund's or a 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
a Fund or a Portfolio, as the case may be, to dispose of such security or
other asset. Where applicable and notwithstanding the foregoing, under normal
market conditions a Fund and a Portfolio must take actions necessary to comply
with the policy of investing at least 65% of total assets in a particular
state. Moreover, each Fund and each 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 Portfolios are listed
below. Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, 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 PORTFOLIOS
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Director or Trustee of various investment companies managed by
Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (56), Vice President and Trustee*
Chairman, 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 (63), 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 (62), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms). Chairman, President and Director, UAM Funds (mutual funds). Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (71), 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 (68), 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 PORTFOLIOS
THOMAS J. FETTER (54), 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 (41), 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 (57), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, Mr. Dynner 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 (62), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), 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.
In addition, William H. Ahern, Jr. (38), Vice President of Eaton Vance and
BMR, is a Vice President of the Connecticut, Florida, Massachusetts, Michigan,
New Jersey, New York and Ohio Portfolios. Mr. Ahern has served as Vice
President of the Connecticut, Michigan, New Jersey and Ohio Portfolios since
October 1994, the Florida and Massachusetts Portfolios since May 1, 1997 and
the New York Portfolio since November 24, 1997. Timothy T. Browse (38), Vice
President of Eaton Vance and BMR, is a Vice President of the Pennsylvania
Portfolio. Mr. Browse has served as a Vice President of the Pennsylvania
Portfolio since May 1, 1997. Cynthia J. Clemson (35), Vice President of Eaton
Vance and BMR, is a Vice President of the California Portfolio. Ms. Clemson
has served as Vice President of the California Portfolio since May 1, 1997.
Mr. Ahern, Mr. Browse and Ms. Clemson are officers of various investment
companies managed by Eaton Vance and BMR.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolios. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Funds and the Portfolios, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Funds, the Portfolios or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolios. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent 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 Portfolios.
Trustees of the Portfolios who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by a Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolios' assets, liabilities, and net
income per share, and will not obligate a Portfolio to retain the services of
any Trustee or obligate a Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolios nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolios are paid by the Funds (and the other series of the Trust) and the
Portfolios, respectively. (The Trustees of the Trust and the Portfolios who
are members of the Eaton Vance organization receive no compensation from the
Trust or the Portfolios.) During the fiscal year ended March 31, 1997, the
noninterested Trustees of the Trust and the Portfolios earned the following
compensation in their capacities as Trustees from the Trust, the Portfolios
and the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
SAMUEL L.
DONALD R. HAYES, III NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION DWIGHT(3) (4) REAMER THORNDIKE(5) TREYNOR
- ---------------------- ---------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Trust(2) $ 3,223 $ 2,922 $ 2,903 $ 2,990 $ 3,209
California Portfolio 941 1,132 1,074 1,162 1,116
Connecticut Portfolio 35 32 31 32 35
Florida Portfolio 1,557 1,808 1,687 1,818 1,796
Massachusetts Portfolio 1,141 1,431 1,311 1,432 1,381
Michigan Portfolio 35 32 31 32 35
New Jersey Portfolio 1,141 1,431 1,311 1,432 1,381
New York Portfolio 1,557 1,808 1,684 1,818 1,796
Ohio Portfolio 347 315 313 322 346
Pennsylvania Portfolio 1,141 1,431 1,311 1,432 1,381
Trust and Fund Complex 145,000(6) 155,000(7) 145,000 148,750(8) 150,000
- ---------
(1) As of April 1, 1998, the Eaton Vance fund complex consists of 143 registered investment companies or series thereof.
(2) The Trust consisted of 23 Funds as of March 31, 1997.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows: California - $39; Connecticut - $4; Florida - $174;
Massachusetts - $128; Michigan - $4; New Jersey - $128; New York - $174; Ohio - $39; Pennsylvania - $128.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows: California - $28; Connecticut - $3; Florida - $164;
Massachusetts - $131; Michigan -$3; New Jersey - $131; New York - $164; Ohio - $28; Pennsylvania - $131.
(5) Mr. Thorndike received deferred compensation from each Portfolio as follows: California - $82; Connecticut - $8; Florida - $450;
Massachusetts - $352; Michigan - $8; New Jersey - $352; New York - $450; Ohio - $82; Pennsylvania - $352.
(6) Includes $11,250 of deferred compensation.
(7) Includes $9,688 of deferred compensation.
(8) Includes $27,151 of deferred compensation.
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
Each Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement, which is substantially the same for each Portfolio. BMR or
Eaton Vance acts as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
approximately $22 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 a family of mutual funds
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $21 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. A staff of 28 (including 6 portfolio
managers and 9 credit specialists) is responsible for the day-to-day
management of over 3,500 issues in 46 mutual fund portfolios. Assets managed
by the municipal investment group are currently over $7.6 billion.
The following persons manage one or more of the Eaton Vance limited
maturity municipal portfolios. For the identity of a Portfolio's portfolio
manager, see the 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, received
his M.B.A. degree from Babson College in 1987 and received his Masters of
Science in Finance degree from Boston College in 1997. Mr. Ahern is a member
of the Boston Security Analysts Society.
Timothy T. Browse is a Vice President of Eaton Vance and BMR. Mr. Browse
graduated from St. Lawrence University in 1981 and received his M.B.A. degree
from Boston University in 1990.
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 each Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolios investment research, advice and supervision, furnishes an
investment program and determines what securities will be purchased, held or
sold by the Portfolio and what portion, if any, of the Portfolio's assets will
be held uninvested. Each Investment Advisory Agreement requires BMR to pay the
salaries and fees of all officers and Trustees of the Portfolio who are
members of the BMR organization and all personnel of BMR performing services
relating to research and investment activities. A Portfolio is responsible for
all expenses not expressly stated to be payable by BMR under its 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 each Portfolio pays BMR, see
the Prospectus. The following table sets forth the net assets of each
Portfolio and the advisory fees earned during the fiscal years ended March 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
ADVISORY FEE FOR FISCAL YEARS ENDED
NET ASSETS ------------------------------------
PORTFOLIO AT 3/31/97 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
- --------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
California $ 43,194,441 $239,320 $327,056 $418,800
Connecticut(1) 12,273,967 64,492 74,308 80,031
Florida 92,909,192 508,203 664,262 821,095
Massachusetts 69,969,936 385,610 506,126 559,365
Michigan(2) 14,996,432 83,756 126,312 0
New Jersey 58,265,939 324,454 412,459 468,562
New York 100,013,748 557,305 722,493 845,836
Ohio(3) 28,469,852 146,515 173,867 0
Pennsylvania 67,875,607 375,224 478,819 554,521
- ----------
(1) 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.
(2) For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio would have paid BMR advisory fees of $163,811.
To enhance the net income of the Portfolio, BMR made a reduction of its advisory fee in the amount of $40,822.
(3) For the fiscal year ended March 31, 1995, absent a fee reduction, the Portfolio would have paid BMR advisory fees of $185,368.
To enhance the net income of the Portfolio, BMR made a reduction of its advisory fee in the amount of $44,856.
</TABLE>
Each Investment Advisory Agreement with BMR continues in effect from year
to year so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Trustees of the Portfolio cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio. Each Agreement
may be terminated at any time without penalty on sixty (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. Each Agreement
provides that BMR may render services to others. Each Agreement also provides
that BMR shall not be liable for any loss incurred in connection with the
performance of its duties, or action taken or omitted under that Agreement, in
the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties thereunder, or for any losses sustained in the
acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of
each Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Trust, Eaton Vance has been engaged to administer the Funds' affairs, subject
to the supervision of the Trustees of the Trust, and shall furnish for the use
of the Funds office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Funds.
Each 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 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, John M. Nelson and Ralph Z. Sorenson. Mr. Hawkes is chairman, president
and chief executive officer and Mr. Gardner is vice chairman 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, the Voting Trustees of which are Messrs.
Gardner, Hawkes and Rowland and Alan R. Dynner, Thomas E. Faust, Jr., William
M. Steul and Wharton P. Whitaker. The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting
trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers or officers and
Directors of EVC and EV. As of March 31, 1998, Messrs. Gardner and Hawkes each
owned 24% of such voting trust receipts, Messrs. Rowland and Faust owned 15%
and 13%, respectively, and Messrs. Dynner, Steul and Whitaker each owned 8%.
Messrs. Hawkes and Dynner are officers or Trustees of the Trust and the
Portfolios and are members of the EVC, BMR, Eaton Vance and EV organizations.
Messrs. Ahern, Browse, Fetter, MacIntosh, Murphy, O'Connor and Woodbury and
Ms. Clemson and Ms. Sanders are officers of the Trust and/or the Portfolios
and are also members of the BMR, Eaton Vance and EV organizations.
In addition, Eaton Vance owns all of the stock of Northeast Properties,
Inc., which is engaged in real estate investment. EVC also owns approximately
21% 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 Trust and the Portfolios. IBT has the
custody of all cash and securities representing a Fund's interest in a
Portfolio, has custody of each Portfolio's assets, maintains the general
ledger of each Portfolio and each Fund and computes the daily net asset value
of interests in 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 Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolios. IBT
also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
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 Class A shares and shares of other funds exchangeable
for Class A shares and listed under "The Eaton Vance Exchange Privilege" in
the Prospectus 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. For sales charges and other information on quantity purchases,
see "How to Buy Shares" in the Prospectus. 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 Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the Class A shares the shareholder
owns in his or her account(s) in the Fund, and shares of other Funds
exchangeable for Class A shares and listed under "The Eaton Vance Exchange
Privilege" in the Prospectus. The sales charge on the shares being purchased
will then be at the rate applicable to the aggregate. For sales charges on
quantity purchases, see "How to Buy Shares" in the Prospectus. 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.
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 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 a 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 a Portfolio, and such obligations,
including those purchased on a when-issued basis, will normally be valued on
the basis of valuations furnished by a pricing service. The pricing service
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities, various relationships
between securities, and yield to maturity in determining value. Taxable
obligations for which price quotations are readily available normally will be
valued at the mean between the latest available bid and asked prices. Open
futures positions on debt securities are valued at the most recent settlement
prices, unless such price does not reflect the fair value of the contract, in
which case the positions will be valued by the Trustees of a Portfolio. Other
assets are valued at fair value using methods determined in good faith by or
at the direction of the Trustees of the Portfolio. The Funds and the
Portfolios will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in a Portfolio, including a Fund, may add to or reduce its
investment in the Portfolio on each day the 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 separately for each Class of
shares of a Fund by multiplying a hypothetical initial purchase order of
$1,000 by the average annual compound rate of return (including capital
appreciation/depreciation, and distributions paid and reinvested) for the
stated period and annualizing the results. The calculation assumes (i) that
all distributions are reinvested at net asset value on the reinvestment dates
during the period, (ii) the deduction of the maximum sales charge from the
initial $1,000 purchase order for Class A shares, (iii) a complete redemption
of the investment, and (iv) the deduction of any CDSC at the end of the
period. For further information concerning the total return of the Classes of
a Fund, see Appendix A, Appendix B and Appendix C.
Yield is computed separately for each Class of shares of a Fund pursuant
to a standardized formula by dividing the net investment income per share
earned during a recent thirty-day period by the maximum offering price or 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 and Class expenses for the period
with the resulting number being divided by the average daily number of Class
shares outstanding and entitled to receive distributions during the period.
This yield figure does not reflect the deduction of any CDSCs which (if
applicable) are imposed upon certain redemptions at the rate set forth under
"How to Redeem Shares" in the Prospectus. A taxable-equivalent yield is
computed by dividing the tax-exempt yield by one minus a stated rate. Yield
calculations assume the current maximum initial sales charge for Class A
shares set forth under "How to Buy Shares" in the 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 Classes of a
Fund, see Appendix A, Appendix B, Appendix C and Appendix E.
A 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. A Fund's
performance may differ from that of other investors in its corresponding
Portfolio, including other investment companies.
The Trust (or Principal Underwriter) may provide investors with
information on municipal bond investing, which may include comparative
performance information, evaluations of Fund performance, charts and/or
illustrations prepared by independent sources (such as Lipper Analytical
Services Inc., CDA/Wiesenberger, Morningstar, Inc., The Bond Buyer, the
Federal Reserve Board or The Wall Street Journal). The Trust may also refer in
investor publications to Tax Freedom Day, as computed by the Tax Foundation,
Washington, DC 20005, to help illustrate the value of tax free investing, as
well as other tax-related information. Information, charts and illustrations
showing the effects of inflation and taxes (including their 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 a Portfolio at a
particular date (including ratings assigned by independent ratings services
such as Moody's, S&P and Fitch) may be included in advertisements and other
material furnished to present and prospective shareholders. Such information
may be stated as a percentage of the Portfolio's bond holdings on such date.
Comparative information about the yield or distribution rate of a Fund and
about average rates of return on certificates of deposit, bank money market
deposit accounts, money market mutual funds and other short-term investments
may also be included in advertisements, supplemental sales literature or
communications of the Fund. Such information may also compare the taxable
equivalent yield (or value) of a Fund to the after-tax yield (or value) of
such other investment vehicles. A bank certificate of deposit, unlike a 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 a 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 a 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 a Fund will be based on
rates published by the Federal Reserve Bank, Donoghues Money Fund Averages,
RateGram or The Wall Street Journal.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in municipal
bond funds. Such information may describe the following advantages of
investing in a municipal bond mutual fund versus individual municipal bonds:
regular monthly income; free reinvestment of distributions; potential for
increased income; bond diversification; liquidity; low-cost easy access; and
active management and in depth credit analysis by investment professionals. In
addition, by investing in a municipal bond fund instead of individual bonds,
an investor can avoid dealing with the complexities of the municipal bond
market, while benefitting from the market access and lower transactions costs
enjoyed by municipal bond funds.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. Each Fund has elected to be treated and intends to
qualify each year, as a regulated investment company ("RIC") under the Code.
Accordingly, each Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its ordinary income (including tax-exempt income) and net
income (after reduction by any available capital loss carryforwards) in
accordance with the timing requirements imposed by the Code, so as to maintain
its RIC status and to avoid paying any federal income or excise tax. Each Fund
so qualified for its fiscal year ended March 31, 1998. Because each Fund
invests its assets in a Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to also satisfy these requirements. Each Portfolio will allocate at least
annually among its investors, including a Fund, each investor's distributive
share of the Portfolio's net taxable (if any) and tax-exempt investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. For purposes of applying the requirements of the Code
regarding qualification as a RIC, the Fund (i) will be deemed to own its
proportionate share of each of the assets of the corresponding Portfolio and
(ii) will be entitled to the gross income of that Portfolio attributable to
such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of its capital gain
net income (which is the excess of its realized capital gains over its
realized capital losses), generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by (i) any available
capital loss carryforwards and 100% of any income from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that a Fund
qualifies as a RIC and 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.
A Portfolio's investment in zero coupon and certain other securities will
cause it to realize income prior to the receipt of cash payments with respect
to these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the Fund to distribute its proportionate
share of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate securities that it might otherwise have continued to
hold in order to generate cash that the Fund may withdraw from the Portfolio
to make distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio (and, hence, for a Fund) to the extent that the issuers
of these securities default on their obligations pertaining thereto. The Code
is not entirely clear regarding the federal income tax consequences of a
Portfolio taking certain positions in connection with ownership of such
distressed securities. For example, the Code is unclear regarding: (i) when a
Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts
or worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges
of debt obligations in a workout context are taxable.
Distributions by a Fund of net tax-exempt interest income that are
properly designated as "exempt-interest dividends" may be treated by
shareholders as interest excludable from gross income under Section 103(a) of
the Code. In order for a Fund to be entitled to pay the tax-exempt interest
income allocated to it by its corresponding Portfolio as exempt-interest
dividends to its shareholders, the Fund must and intends to satisfy certain
requirements, including the requirement that, at the close of each quarter of
its taxable year, at least 50% of the value of its total assets consists of
obligations the interest on which is exempt from regular federal income tax
under Code Section 103(a). For purposes of applying this 50% requirement, the
Fund will be deemed to own its proportionate share of each of the assets of
the Portfolio, and the Portfolio currently intends to invest its assets in a
manner such that the Fund can meet this 50% requirement. Interest on certain
municipal obligations is treated as a tax preference item for purposes of the
AMT. Shareholders of 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, a Portfolio may realize some
short-term and long-term capital gains (and/or losses) as a result of market
transactions, including sales of portfolio securities and rights to when-
issued securities and options and futures transactions. A Portfolio may also
realize taxable income from certain short-term taxable obligations, securities
loans, a portion of discount with respect to certain stripped municipal
obligations or their stripped coupons and certain realized gains or income
attributable to accrued market discount. Any distributions by a Fund of its
share of such capital gains (after reduction by any capital loss
carryforwards) or taxable income would be taxable to shareholders of that
Fund. However, it is expected that such amounts, if any, would normally be
insubstantial in relation to the tax exempt interest earned by a Portfolio and
allocated to a Fund. Certain distributions of a Fund, if declared in October,
November or December and paid the following January, may be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
A Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character
of Fund distributions to shareholders. For example, certain positions held by
a Portfolio on the last business day of each taxable year will be "marked to
market" (i.e., treated as if closed out on such day), and any resulting gain
or loss will generally be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by a Portfolio that substantially
diminish a Portfolio's risk of loss with respect to other positions in its
portfolio may constitute "straddles," which are subject to tax rules that may
cause deferral of Portfolio losses, adjustments in the holding periods of
Portfolio securities, and conversion of short-term capital losses into long-
term capital losses. A Portfolio may have to limit its activities in options
and futures contracts in order to enable a Fund to maintain its RIC status for
federal income tax purposes.
Any loss realized upon the sale or exchange of shares of a Fund with a tax
holding period of 6 months or less will be disallowed to the extent the
shareholder has received tax-exempt interest with respect to such shares and,
to the extent the loss exceeds the disallowed amount, will be treated as a
long-term capital loss to the extent of any distribution treated as net long-
term capital gains with respect to such shares. In addition, a loss realized
on a redemption or other disposition of Fund shares may be disallowed to the
extent the shareholder acquired other Fund shares (whether through the
reinvestment of distributions or otherwise) within the period beginning 30
days before the redemption of the loss shares and ending 30 days after such
date.
Amounts paid by 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.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Shareholders should consult their own
tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local and, where applicable,
foreign tax consequences of investing in a Fund.
PRINCIPAL UNDERWRITER
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Trust will
exceed the amounts paid therefor. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent, see Appendix B.
CLASS A SHARES. Class A shares of each Fund may be continuously purchased
at the public offering price through Authorized Firms which have agreements
with the Principal Underwriter. The Trust reserves the right to suspend or
limit the offering of its shares to the public at any time. 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 Prospectus (see "How to Buy Shares"). Such table is applicable to
purchases of a Fund alone or in combination with purchases of certain other
funds offered by the Principal Underwriter, made at a single time by (i) an
individual, or an individual, his spouse and their children under the age of
twenty-one, purchasing shares for his or their own account, and (ii) a trustee
or other fiduciary purchasing shares for a single trust estate or a single
fiduciary account. The table is also presently applicable to (1) purchases of
Class A shares pursuant to a written Statement of Intention; or (2) purchases
of Class A shares pursuant to the Right of Accumulation and declared as such
at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares
for the assets of such investment company. Class A shares may be sold at net
asset value to any officer, director, trustee, general partner or employee of
the Trust, a 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. Class A shares 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 Principal Underwriter acts as principal in selling Class A shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares 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 Class A 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. 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.
CLASS B AND CLASS C SHARES. Under the Distribution Agreements, the
Principal Underwriter acts as principal in selling Class B and Class C shares.
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, each Class B and Class C makes payments to the Principal Underwriter
pursuant to their Distribution Plans as described in the Prospectus; the
provisions of the plan relating to such payments are included in the
Distribution Agreements. The Distribution Agreements are renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Distribution Plans or the Distribution Agreements), may be terminated on
sixty days' notice either by such Trustees or by vote of a majority of the
outstanding Class B and Class C shares or on six months' notice by the
Principal Underwriter and is automatically terminated upon assignment. The
Principal Underwriter distributes Class B and Class C shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of each of its Class A shares has adopted 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
"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 Prospectus.
The Plan continues in effect from year to year, for so long as such
continuance is approved by a 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 the Plan Trustees or by a vote of a majority of the outstanding Class
A shares of a Fund. The Plan was approved by the Trustees, including the Plan
Trustees, on June 23, 1997.
Under the Plan, an officer of the Trust shall provide to the Trustees for
their review, and the Trustees shall review at least quarterly, a written
report of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
payments described herein without approval of the affected shareholders of
Class A shares, and all material amendments of the Plan must also be approved
by the Trustees of the Trust in the manner described above. So long as the
Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined
that in their judgment there is a reasonable likelihood that the Plan will
benefit each Fund and its Class A shareholders.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C shares 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 with respect to Class B and Class C shares.
The Plans provide that each Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of Class B or Class C 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 California, Florida, Massachusetts, New Jersey, New York and Pennsylvania
Funds and 3.5% in the case of the Connecticut, Michigan and Ohio Funds of
Class B sales and 6.25% of Class C sales 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 respective Class and will
accordingly reduce the Class's net assets upon such accrual, all in accordance
with generally accepted accounting principles. The amount payable on each day
is limited to 1/365 of .75% of a Class's net assets on such day. The level of
a Class's net assets changes each day and depends upon the amount of sales and
redemptions of shares, the changes in the value of the investments held by the
Portfolio, the expenses of the Class, Fund and the Portfolio accrued and
allocated to the Fund and Class 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 Trust does not accrue
possible future payments as a liability of a Class or reduce a Class'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 Class 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 Trust 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 Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through Authorized Firms), the level and timing of redemptions of shares upon
which a CDSC will be imposed, the level and timing of redemptions of shares
upon which no CDSC will be imposed (including redemptions of shares pursuant
to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Plan. Periods with a high level of sales of Class shares
accompanied by a low level of early redemptions of Class 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 0.90% of a Class's average daily net assets per annum.
For actual payments made and the outstanding uncovered distribution charges of
the Principal Underwriter, see Appendix B. The Trust believes that the
combined rate of all these payments may be higher
than the rate of payments made under distribution plans adopted by other
investment companies pursuant to Rule 12b-1.
Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions and service fees for Class C
sales and sales commissions for Class B sales at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plans through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plans and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing Class B and Class C
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and
the Distribution Agreement contains a similar provision. The Plans and
Distribution Agreements 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 applicable Class. The Plans require quarterly Trustee review
of a written report of the amount expended under the Plans and the purposes
for which such expenditures were made. The Plans may not be amended to
increase materially the payments described therein without approval of the
shareholders of the affected Class and the Trustees. So long as the Plans are
in effect, the selection and nomination of the noninterested Trustees shall be
committed to the discretion of such Trustees. Each Plan was approved by the
Trustees, including the 12b-1 Trustees, on June 23, 1997.
The Trustees of the Trust believe that the Plans will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its Class B and Class C 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 Class B and Class C shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plans 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 Plans are
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 Plans will benefit the Fund and its Class B and
Class C 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 each Portfolio and of
all other accounts managed by it for execution with many firms. BMR uses its
best efforts to obtain execution of portfolio security transactions at prices
which are advantageous to each Portfolio and at reasonably competitive spreads
or (when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the 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 Portfolios are generally traded in the over-the-
counter market on a net basis (i.e., without commission) through broker-
dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as
the spread. The Portfolios may also purchase municipal obligations from
underwriters, the cost of which may include undisclosed fees and concessions
to the underwriters. While it is anticipated that each 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 Portfolios and BMR's other
clients for providing brokerage and research services to BMR.
The following table shows brokerage commissions paid by each Portfolio for
each of the fiscal year ends ended March 31, 1997, 1996 and 1995:
PORTFOLIO MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
- --------- -------------- -------------- ------------------
California .......... $26,519 $ 5,129 $ --
Connecticut ......... 11,480 1,257 --
Florida ............. -- 10,609 --
Massachusetts ....... 27,291 9,775 --
Michigan ............ 19,514 1,986 --
New Jersey .......... 61,275 8,845 --
New York ............ 40,494 11,615 --
Ohio ................ 14,023 2,992 --
Pennsylvania ........ 34,923 7,542 --
All of such portfolio security transactions were directed to firms which
provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities), and the amounts of such transactions
for the fiscal year ended March 31, 1997 were as follows: California --
$208,919,974; Connecticut -- $86,456,944; Florida -- $0; Massachusetts --
$255,964,805; Michigan -- $140,877,687; New Jersey -- $432,619,673; New York
- -- $360,095,562; Ohio -- $98,188,413; and Pennsylvania -- $365,165,141.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of a Portfolio
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
BMR determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This
determination may be made 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 Portfolios' 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 Portfolios may
also be appropriate for other investment accounts managed by BMR or its
affiliates. Whenever decisions are made to buy or sell securities by a
Portfolio and one or more of such other accounts simultaneously, BMR will
allocate the security transactions (including "hot" issues) in a manner which
it believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where a Portfolio will not participate in
a transaction that is allocated among other accounts. If an aggregated order
cannot be filled completely, allocations will generally be made on a pro rata
basis. An order may not be allocated on a pro rata basis where, for example:
(i) consideration is given to portfolio managers who have been instrumental in
developing or negotiating a particular investment; (ii) consideration is given
to an account with specialized investment policies that coincide with the
particulars of a specific investment; (iii) pro rata allocation would result
in odd-lot or de minimis amounts being allocated to a portfolio or other
client; or (iv) where BMR reasonably determines that departure from a pro rata
allocation is advisable. While these aggregation and allocation policies could
have a detrimental effect on the price or amount of the securities available
to the Portfolios from time to time, it is the opinion of the Trustees of the
Trust and the Portfolios that the benefits available from the BMR organization
outweigh any disadvantage that may arise from exposure to simultaneous
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 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 each Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
Each Portfolio's Declaration of Trust provides that a Fund and other
entities permitted to invest in 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.
Each 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
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 Funds and the Portfolios,
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 Funds and the Portfolios appear in the Funds' most recent annual
report to shareholders and the unaudited financial statements of the Funds and
the Portfolios appear in the Funds' most recent semiannual report to
shareholders, both of which are incorporated by reference into this SAI. A
copy of the Funds' semiannual and annual reports accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the fiscal year ended March 31, 1997 and the unaudited financial information
for the six months ended September 30, 1997, for the Funds and the Portfolios
listed below, all as previously filed electronically with the Commission:
Six Months Ended September 30, 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
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
Pennsylvania Limited Maturity Municipals Portfolio
(Accession No. 0000950156-97-000989)
Fiscal Year Ended March 31, 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
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
Pennsylvania Limited Maturity Municipals Portfolio
(Accession No. 0000950146-97-000905)
<PAGE>
APPENDIX A: CLASS A SHARES
FEES AND EXPENSES
SERVICE PLAN
During the fiscal year ended March 31, 1997, the following table shows (1)
amount of service fees on Class A shares (formerly Class II shares) paid under
the Plan, and (2) amount of service fees on Class A shares (formerly Class II
shares) paid to Authorized Firms (the balance of which being retained by the
Principal Underwriter).
SERVICE FEES TO
CLASS A SERVICE FEES AUTHORIZED FIRMS
- ------- ------------ ----------------
California ............................ $ 3,448 $3,402
Connecticut ........................... -0- -0-
Florida ............................... 9,001 8,872
Massachusetts ......................... 7,836 7,019
Michigan .............................. -0- -0-
New Jersey ............................ 7,236 7,110
New York .............................. 10,036 9,901
Ohio .................................. -0- -0-
Pennsylvania .......................... 6,763 6,703
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to April 1, 1998 reflects the total return of the predecessor to Class
A. Total return prior to the Predecessor Fund's commencement of operations
reflects the total return of Class B, adjusted to reflect the Class A sales
charge. The Class B total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class A total return would be different. The "Value of Initial
Investment" reflects the deduction of the maximum sales charge of 2.25%. Past
performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost. Information presented with two asterisks (**)
includes the effect of subsidizing expenses. Returns would have been lower
without subsidies.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- CALIFORNIA
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- --------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $977.44 $1,279.30 30.88% 5.17% 27.93% 4.72%
5 Years Ended
9/30/97** 9/30/92 $977.01 $1,243.92 27.32% 4.95% 24.39% 4.46%
1 Year Ended
9/30/97** 9/30/96 $977.62 $1,043.06 6.69% 6.69% 4.31% 4.31%
- ------------
*Predecessor Fund commenced operations June 27, 1996.
VALUE OF A $1,000 INVESTMENT -- CONNECTICUT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/16/93 $977.43 $1,162.34 18.92% 3.96% 16.23% 3.43%
1 Year Ended
9/30/97** 9/30/96 $977.55 $1,038.45 6.23% 6.23% 3.84% 3.84%
- ------------
*Predecessor Fund commenced operations January 21, 1997.
VALUE OF A $1,000 INVESTMENT -- FLORIDA
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $977.42 $1,279.09 30.87% 5.17% 27.91% 4.72%
5 Years Ended
9/30/97** 9/30/92 $977.59 $1,246.28 27.49% 4.98% 24.63% 4.50%
1 Year Ended
9/30/97** 9/30/96 $977.70 $1,032.19 5.58% 5.58% 3.22% 3.32%
- ------------
*Predecessor Fund commenced operations June 27, 1996.
VALUE OF A $1,000 INVESTMENT -- MASSACHUSETTS
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 6/1/92 $977.52 $1,256.20 28.51% 4.82% 25.62% 4.37%
5 Years Ended
9/30/97 9/30/92 $977.67 $1,229.52 25.76% 4.69% 22.95% 4.22%
1 Year Ended
9/30/97 9/30/96 $977.62 $1,033.25 5.69% 5.69% 3.33% 3.33%
- ------------
*Predecessor Fund commenced operations June 27, 1996.
VALUE OF A $1,000 INVESTMENT -- MICHIGAN
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/16/93 $977.40 $1,170.15 19.72% 4.12% 17.02% 3.59%
1 Year Ended
9/30/97** 9/30/96 $977.53 $1,046.22 7.03% 7.03% 4.62% 4.62%
- ------------
*Predecessor Fund commenced operations October 22, 1996.
VALUE OF A $1,000 INVESTMENT -- NEW JERSEY
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 6/1/92 $977.03 $1,270.67 30.05% 5.05% 27.07% 4.60%
5 Years Ended
9/30/97** 9/30/92 $977.63 $1,235.81 26.41% 4.80% 23.58% 4.33%
1 Year Ended
9/30/97** 9/30/96 $977.71 $1,040.22 6.40% 6.40% 4.02% 4.02%
- ------------
*Predecessor Fund commenced operations June 27, 1996.
VALUE OF A $1,000 INVESTMENT -- NEW YORK
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $977.44 $1,313.28 34.36% 5.69% 31.33% 5.24%
5 Years Ended
9/30/97** 9/30/92 $977.66 $1,278.57 30.78% 5.51% 27.86% 5.04%
1 Year Ended
9/30/97** 9/30/96 $977.89 $1,051.06 7.48% 7.48% 5.11% 5.11%
- ------------
*Predecessor Fund commenced operations May 29, 1992.
VALUE OF A $1,000 INVESTMENT -- OHIO
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/16/93 $977.54 $1,182.75 20.99% 4.36% 18.28% 3.83%
1 Year Ended
9/30/97 9/30/96 $977.69 $1,042.43 6.62% 6.62% 4.24% 4.24%
- ------------
*Predecessor Fund commenced operations October 22, 1996.
VALUE OF A $1,000 INVESTMENT -- PENNSYLVANIA
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ----------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ----------- -------------- ------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 6/1/92 $977.52 $1,282.21 31.17% 5.22% 28.22% 4.77%
5 Years Ended
9/30/97 9/30/92 $977.04 $1,236.98 26.60% 4.83% 23.70% 4.35%
1 Year Ended
9/30/97 9/30/96 $977.82 $1,044.81 6.85% 6.85% 4.48% 4.48%
- ------------
*Predecessor Fund commenced operations June 27, 1996.
</TABLE>
The following shows the yield of Class A shares (formerly Class II shares)
for the thirty-day period ended September 30, 1997 and the yield required of a
taxable security that would produce an after-tax yield equivalent to the
thirty-day yield, assuming a certain combined federal and State tax rate. If a
Portfolio's or Fund's expenses had not been subsidized, yield would be lower.
Appendix E contains state specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS A 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- -------- ------------ ---------------- --------
California ......... 4.08% 6.52% 37.42%
Connecticut ........ 4.15% 6.30% 34.11%
Florida ............ 4.03% 6.63% 38.18%
Massachusetts ...... 4.18% 6.88% 39.28%
Michigan ........... 3.40% 5.26% 35.33%
New Jersey ......... 4.09% 6.33% 35.40%
New York ........... 4.28% 6.99% 38.80%
Ohio ............... 4.26% 6.63% 35.76%
Pennsylvania ....... 4.12% 6.44% 36.00%
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 2, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class A
(formerly Class II) and of each Fund. In addition, as of the same date, the
following record owners held the amounts of Class A (formerly Class II) shares
indicated below, which were held either individually or on behalf of their
customers who are the beneficial owners of such shares, and as to which they
have voting power under certain limited circumstances:
<TABLE>
<S> <C> <C> <C>
CALIFORNIA FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 25.8%
CONNECTICUT FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 25.3%
FLORIDA FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 16.5%
MASSACHUSETTS FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 12.8%
MICHIGAN FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 17.8%
Smith Barney, Inc. New York, NY 5.8%
NEW JERSEY FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 13.7%
NEW YORK FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 15.4%
OHIO FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 8.5%
Key Clearing Corp. Cleveland, OH 9.2%
PENNSYLVANIA FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 23.9%
</TABLE>
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
DISTRIBUTION PLANS
Each Distribution Plan and Distribution Agreement remains in effect until
April 28, 1998 and may be continued as described under "Distribution Plans --
Class B and Class C Shares." Pursuant to Rule 12b-1, the Plan has been
approved by the relevant Fund's shareholders and by the Board of Trustees of
the Trust, as required by Rule 12b-1.
The following table shows, for the fiscal year ended March 31, 1997, (1)
sales commissions paid by the Principal Underwriter to Authorized Firms on
sales of Class I shares (now Class B shares), (2) distribution payments to the
Principal Underwriter allocated to Class B shares under the Plan, (3) CDSC
payments to the Principal Underwriter, (4) service fees on Class B shares
(formerly Class I shares) paid under the Plan, and (5) amount of service fees
on Class B shares (formerly Class I shares) paid to Authorized Firms (the
balance of which being retained by the Principal Underwriter).
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO FEES TO
SALES THE PRINCIPAL THE PRINCIPAL SERVICE AUTHORIZED
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER FEES FIRMS
- ------- ----------- ----------- ----------- ---- -----
<S> <C> <C> <C> <C> <C>
California ........... $ 7,351 $308,795 $110,000 $ 69,292 $ 68,950
Connecticut .......... 2,464 90,685 27,000 16,626 16,438
Florida .............. 11,142 631,417 245,000 130,286 129,625
Massachusetts ........ 18,041 493,460 178,000 109,020 107,717
Michigan ............. 3,888 118,937 65,000 40,130 39,876
New Jersey ........... 28,881 427,268 138,000 94,190 93,603
New York ............. 36,166 754,897 269,000 164,114 163,628
Ohio ................. 19,479 206,303 78,000 37,148 37,090
Pennsylvania ......... 29,738 443,211 164,000 101,403 101,041
</TABLE>
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1997, each Fund paid the Principal
Underwriter for repurchase transactions handled by it $2.50 for each such
transaction which aggregated as follows: California - $765; Connecticut -
$222.50; Florida - $1,637.50; Massachusetts - $1,587.50; Michigan - $487.50;
New Jersey - $1,560; New York - $2,525; Ohio - $492.50; and Pennsylvania -
$1,780.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator," the Administrator
currently receives no compensation for providing administrative services to
each Fund. For the fiscal year ended March 31, 1995, $12,014 of the
Connecticut Fund's operating expenses were allocated to the Administrator.
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in each table. Past performance is not indicative of future results.
Investment return and principal value will fluctuate; shares, when redeemed,
may be worth more or less than their original cost. Information presented with
two asterisks (**) includes the effect of subsidizing expenses. Return would
have been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- CALIFORNIA
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $1,287.88 $1,287.88 28.79% 4.85% 28.79% 4.85%
5 Years Ended
9/30/97 9/30/92 $1,252.84 $1,252.84 25.28% 4.61% 25.28% 4.61%
1 Year Ended
9/30/97 9/30/96 $1,060.60 $1,060.60 6.06% 6.06% 3.06% 3.06%
- ------------
* Investment operations began on May 29, 1992.
VALUE OF A $1,000 INVESTMENT -- CONNECTICUT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/16/93 $1,192.32 $1,192.32 19.23% 4.02% 19.23% 4.02%
1 Year Ended
9/30/97** 9/30/96 $1,058.94 $1,028.94 5.89% 5.89% 2.89% 2.89%
- ------------
* Investment operations began on April 16, 1993.
VALUE OF A $1,000 INVESTMENT -- FLORIDA
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $1,278.49 $1,278.49 27.85% 4.71% 27.85% 4.71%
5 Years Ended
9/30/97 9/30/92 $1,245.45 $1,245.45 24.54% 4.49% 24.54% 4.49%
1 Year Ended
9/30/97 9/30/96 $1,046.45 $1,016.45 4.64% 4.64% 1.64% 1.64%
- ------------
* Investment operations began on May 29, 1992.
VALUE OF A $1,000 INVESTMENT -- MASSACHUSETTS
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 6/1/92 $1,285.09 $1,285.09 28.51% 4.82% 28.51% 4.82%
5 Years Ended
9/30/97 9/30/92 $1,257.60 $1,257.60 25.76% 4.69% 25.76% 4.69%
1 Year Ended
9/30/97 9/30/96 $1,056.90 $1,026.90 5.69% 5.69% 2.69% 2.69%
- ------------
* Investment operations began on June 1, 1992.
VALUE OF A $1,000 INVESTMENT -- MICHIGAN
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 4/16/93 $1,189.78 $1,189.78 18.98% 3.97% 18.98% 3.97%
1 Year Ended
9/30/97** 9/30/96 $1,063.30 $1,033.30 6.33% 6.33% 3.33% 3.33%
- ----------
* Investment operations began on April 16, 1993.
VALUE OF A $1,000 INVESTMENT -- NEW JERSEY
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 6/1/92 $1,290.36 $1,290.36 29.04% 4.90% 29.04% 4.90%
5 Years Ended
9/30/97 9/30/92 $1,254.19 $1,254.19 25.42% 4.63% 25.42% 4.63%
1 Year Ended
9/30/97 9/30/96 $1,059.41 $1,029.41 5.94% 5.94% 2.94% 2.94%
- ----------
* Investment operations began on June 1, 1992.
VALUE OF A $1,000 INVESTMENT -- NEW YORK
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/29/92 $1,304.17 $1,304.17 30.42% 5.10% 30.42% 5.10%
5 Years Ended
9/30/97 9/30/92 $1,269.41 $1,269.41 26.94% 4.89% 26.94% 4.89%
1 Year Ended
9/30/97 9/30/96 $1,069.38 $1,039.38 6.94% 6.94% 3.94% 3.94%
- ----------
* Investment operations began on May 29, 1992.
VALUE OF A $1,000 INVESTMENT -- OHIO
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 4/16/93 $1,208.03 $1,208.03 20.80% 4.33% 20.80% 4.33%
1 Year Ended
9/30/97 9/30/96 $1,063.96 $1,033.96 6.40% 6.40% 3.40% 3.40%
- ----------
* Investment operations began on April 16, 1993.
VALUE OF A $1,000 INVESTMENT -- PENNSYLVANIA
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT THE MAXIMUM THE MAXIMUM -------------------------- --------------------------
PERIOD* DATE CDSC ON 9/30/97 CDSC ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- ------------- ---------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 6/1/92 $1,311.70 $1,311.70 31.17% 5.22% 31.17% 5.22%
5 Years Ended
9/30/97 9/30/92 $1,266.05 $1,266.05 26.60% 4.83% 26.60% 4.83%
1 Year Ended
9/30/97 9/30/96 $1,068.51 $1,038.51 6.85% 6.85% 3.85% 3.85%
- ------------
* Investment operations began on June 1, 1992.
</TABLE>
The following shows the yield of Class B shares for the thirty-day period
ended September 30, 1997 and the yield required of a taxable security that
would produce an after-tax yield equivalent to the thirty-day yield, assuming
a certain combined federal and State tax rate. If a Portfolio's or Fund's
expenses had not been subsidized, yield would be lower. Appendix E contains
state specific applicable tax rates and income brackets.
TAXABLE SECURITY ASSUMED
CLASS B 30-DAY YIELD EQUIVALENT YIELD TAX RATE
- ------- ------------ ---------------- --------
California ........ 3.34% 5.34% 37.42%
Connecticut ....... 3.23% 4.90% 34.11%
Florida ........... 3.29% 5.47% 39.89%
Massachusetts ..... 3.44% 5.67% 39.28%
Michigan .......... 4.15% 6.42% 35.33%
New Jersey ........ 3.35% 5.19% 35.40%
New York .......... 3.55% 5.80% 38.80%
Ohio .............. 3.55% 5.53% 35.76%
Pennsylvania ...... 3.39% 5.30% 36.00%
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 2, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class B
(formerly Class I) and of each Fund. In addition, as of the same date, the
following record owners held the amounts of Class B (formerly Class I) shares
indicated below, which were held either individually or on behalf of their
customers who are the beneficial owners of such shares, and as to which they
have voting power under certain limited circumstances:
<TABLE>
<S> <C> <C> <C>
CALIFORNIA FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 22.1%
Wexford Clearing Services Corp. FBO George
E. Harvey TTEE, George E. Harvey Trust Fremont, CA 7.8%
CONNECTICUT FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 22.1%
NFSC FEBO Herbert Cohen Woodbury, NY 6.0%
FLORIDA FUND -- NFSC FEBO Albert Cohen Family LTD No. Miami Beach, FL 26.8%
Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 15.3%
MASSACHUSETTS FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 11.5%
MICHIGAN FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 13.3%
Smith Barney, Inc. New York, NY 7.3%
Smith Barney, Inc. New York, NY 5.1%
NEW JERSEY FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 15.2%
Harvey B. Fine Linden, NJ 6.0%
NEW YORK FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 14.5%
OHIO FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 13.0%
Holdon, Agent for Fox & Hounds PLL Findlay, OH 7.6%
PENNSYLVANIA FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 17.0%
</TABLE>
<PAGE>
APPENDIX C: CLASS C SHARES
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to April 1, 1998 reflects the total return of the predecessor to Class
C. Total return prior to the Predecessor Fund's commencement of operations
reflects the total return of Class B, adjusted to reflect the Class C sales
charge. The Class B total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class C total return would be different. Past performance is
not indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Returns would have been lower without
subsidies.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT -- FLORIDA
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DEDUCTING AFTER DEDUCTING DEDUCTING THE DEDUCTING THE
THE MAXIMUM THE MAXIMUM MAXIMUM CDSC MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------- ------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ---------- --------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $1,000 $1,273.11 $1,273.11 27.31% 4.63% 27.31% 4.63%
5 Years Ended
9/30/97** 9/30/92 $1,000 $1,240.20 $1,240.20 24.02% 4.40% 24.02% 4.40%
1 Year Ended
9/30/97** 9/30/96 $1,000 $1,045.46 $1,035.46 4.55% 4.55% 3.55% 3.55%
- ------------
*Predecessor Fund commenced operations December 8, 1993.
VALUE OF A $1,000 INVESTMENT -- MASSACHUSETTS
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DEDUCTING AFTER DEDUCTING DEDUCTING THE DEDUCTING THE
THE MAXIMUM THE MAXIMUM MAXIMUM CDSC MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------- ------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ---------- --------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 6/1/92 $1,000 $1,281.72 $1,281.72 28.17% 4.77% 28.17% 4.77%
5 Years Ended
9/30/97** 9/30/92 $1,000 $1,254.32 $1,254.32 25.42% 4.64% 25.42% 4.64%
1 Year Ended
9/30/97** 9/30/96 $1,000 $1,055.59 $1,045.59 5.56% 5.56% 4.56% 4.56%
- ------------
*Predecessor Fund commenced operations December 9, 1993.
VALUE OF A $1,000 INVESTMENT -- NEW YORK
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DEDUCTING AFTER DEDUCTING DEDUCTING THE DEDUCTING THE
THE MAXIMUM THE MAXIMUM MAXIMUM CDSC MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------- ------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ---------- --------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 5/29/92 $1,000 $1,297.88 $1,297.88 29.79% 5.00% 29.79% 5.00%
5 Years Ended
9/30/97** 9/30/92 $1,000 $1,263.42 $1,263.42 26.34% 4.79% 26.34% 4.79%
1 Year Ended
9/30/97** 9/30/96 $1,000 $1,066.70 $1,056.70 6.67% 6.67% 5.67% 5.67%
- ------------
*Predecessor Fund commenced operations December 8, 1993.
VALUE OF A $1,000 INVESTMENT -- PENNSYLVANIA
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE DEDUCTING AFTER DEDUCTING DEDUCTING THE DEDUCTING THE
THE MAXIMUM THE MAXIMUM MAXIMUM CDSC MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------- ------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ---------- --------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 6/1/92 $1,000 $1,312.27 $1,312.27 31.23% 5.23% 31.23% 5.23%
5 Years Ended
9/30/97** 9/30/92 $1,000 $1,266.57 $1,266.57 26.66% 4.84% 26.66% 4.84%
1 Year Ended
9/30/97** 9/30/96 $1,000 $1,067.49 $1,057.49 6.75% 6.75% 5.75% 5.75%
- ------------
*Predecessor Fund commenced operations December 8, 1993.
</TABLE>
<PAGE>
APPENDIX D: STATE SPECIFIC INFORMATION
RISKS OF CONCENTRATION
The following information as to certain State specific considerations is
given to investors in view of a Portfolio's policy of concentrating its
investments in particular State issuers. Such information supplements the
information in the Prospectus. It is derived from sources that are generally
available to investors and is believed to be accurate. Such information
constitutes only a brief summary, does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of issuers of each particular State. Neither the Trust
nor the Portfolios have independently verified this information.
CALIFORNIA
Economic Factors
Fiscal Years Prior to 1995-96. Pressures on the State's budget in the late
1980's and early 1990's were caused by a combination of external economic
conditions and growth of the largest General Fund Programs - K-14 education,
health, welfare and corrections -- at rates faster than the revenue base.
These pressures could continue as the State's overall population and school
age population continue to grow, and as the State's corrections program
responds to a "Three Strikes" law enacted in 1994, which requires mandatory
life prison terms for certain third-time felony offenders. In addition, the
State's health and welfare programs are in a transition period as a result of
recent federal and State welfare reform initiatives.
As a result of these factors and others, and especially because a severe
recession between 1990-94 reduced revenues and increased expenditures for
social welfare programs, from the late 1980's until 1992-93, the State had
periods of significant budget imbalance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in its budget reserve, the Special Fund for
Economic Uncertainties ("SFEU") approaching $2.8 billion at its peak at June
30, 1993. Between the 1991-92 and 1994-95 Fiscal Years, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance, including significant cuts in health and welfare program
expenditures; transfers of program responsibilities and funding from the State
to local governments; transfers of about $3.6 billion in annual local property
tax revenues from other local governments to local school districts, thereby
reducing State funding for schools under Proposition 98; and revenue increases
(particularly in the 1991-92 Fiscal Year budget), most of which were for a
short duration.
Despite these budget actions, as noted, the effects of the recession led
to large, unanticipated deficits in the SFEU, as compared to projected
positive balances. By the 1993-94 Fiscal Year, the accumulated deficit was so
large that it was impractical to budget to retire such deficits in one year,
so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, again using cross-fiscal year
revenue anticipation warrants to partly finance the deficit into the 1995-96
fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its
ongoing obligations. When the Legislature and the Governor failed to adopt a
budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish cash
reserves, the State Controller issued registered warrants to pay a variety of
obligations representing prior years' or continuing appropriations, and
mandates from court orders. Available funds were used to make
constitutionally-mandated payments, such as debt service on bonds and
warrants. Between July 1 and September 4, 1992, when the budget was adopted,
the State Controller issued a total of approximately $3.8 billion of
registered warrants.
For several fiscal years during the recession, the State was forced to
rely on external debt markets to meet its cash needs, as a succession of notes
and revenue anticipation warrants were issued in the period from June 1992 to
July 1994, often needed to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the
accumulated budget deficit over the end of a fiscal year, as noted earlier.
The last and largest of these borrowings was $4.0 billion of revenue
anticipation warrants which were issued in July, 1994 and matured on April 25,
1996.
1995-96 and 1996-97 Fiscal Years
With the end of the recession, and a growing economy beginning in 1994, the
State's financial condition improved markedly in the last two fiscal years,
with a combination of better than expected revenues, slowdown in growth of
social welfare programs, and continued spending restraint based on the actions
taken in earlier years. The last of the recession-induced budget deficits was
repaid, allowing the SFEU to post a positive cash balance for only the second
time in the 1990's, totaling $281 million as of June 30, 1997. The State's
cash position also returned to health, as cash flow borrowing was limited to
$3 billion in 1996-97, and no deficit borrowing has occurred over the end of
these last two fiscal years.
In each of these two fiscal years, the State budget contained the
following major features:
1. Expenditures for K-14 schools grew significantly, as new revenues
were directed to school spending under Proposition 98. This new money
allowed several new education initiatives to be funded, and raised K-12
per-pupil spending to around $4,900 by Fiscal Year 1996-97. See "STATE
FINANCES - Proposition 98" above.
2. The budgets restrained health and welfare spending levels, holding
to reduced benefit levels enacted in earlier years, and attempted to
reduce General Fund spending by calling for greater support from the
federal government. The State also attempted to shift to the federal
government a larger share of the cost of incarceration and social services
for illegal aliens. Some of these efforts were successful, and federal
welfare reform also helped, but as a whole the federal support never
reached the levels anticipated when the budgets were enacted. These
funding shortfalls were, however, filled by the strong revenue
collections, which exceeded expectations.
3. General Fund support for the University of California and the
California State University system grew by an average of 5.2 percent and
3.3. percent per year, respectively, and there were no increases in
student fees.
4. General Fund support for the Department of Corrections grew as
needed to meet increased prison population. No new prisons were approved
for construction, however.
5. There were no tax increases, and starting January 1, 1997, there
was a 5 percent cut in corporate taxes. The suspension of the Renter's Tax
Credit, first taken as a cost-saving measure during the recession, was
continued.
As noted, the economy grew strongly during these fiscal years, and as a
result, the General Fund took in substantially greater tax revenues (about
$2.2 billion in 1995-96 and $1.6 billion in 1996-97) than were initially
planned when the budgets were enacted. These additional funds were largely
directed to school spending as mandated by Proposition 98, and to make up
shortfalls from reduced federal health and welfare aid. As a result, there was
no dramatic increase in budget reserves, although the accumulated budget
deficit from the recession years was finally eliminated in the past fiscal
year.
1997-98 Fiscal Year
Background
On January 9, 1997, the Governor released his proposed budget for the
1997-98 Fiscal Year (the "Proposed Budget"). The Proposed Budget estimated
General Fund revenues and transfers of about $50.7 billion, and proposed
expenditures of $50. 3 billion, resulting in an anticipated budget reserve in
the SFEU of about $550 million. The Proposed Budget included provisions for a
further 10% cut in Bank and Corporation Taxes, which ultimately was not
enacted by the Legislature.
At the time of the Department of Finance May Revision, released on May 14,
1997, the Department of Finance increased its revenue estimate for the
upcoming fiscal year by $1.3 billion, in response to the continued strong
growth in the State's economy. Budget negotiations continued into the summer,
with major issues to be resolved including final agreement on State welfare
reform, an increase in State employee salaries and consideration of the tax
cut proposed by the Governor.
In May, 1997, action was taken by the California Supreme Court in an
ongoing lawsuit, PERS v. Wilson, below, which made final a judgment against
the State requiring an immediate payment from the General Fund to the Public
Employees Retirement Fund ("PERF") to make up certain deferrals in annual
retirement fund contributions which had been legislated in earlier years for
budget savings, and which the courts found to be unconstitutional. On July 30,
1997, following a direction from the Governor, the Controller transferred
$1.235 billion from the General Fund to the PERF in satisfaction of the
judgment, representing the principal amount of the improperly deferred
payments from 1995-96 and 1996-97.
Fiscal Year 1997-98 Budget Act
Following the transfer of funds to the PERF, final agreement was reached
within a few weeks on the welfare package and the remainder of the budget. The
Legislature passed the Budget Bill on August 11, 1997, along with numerous
related bills to implement its provisions. Agreement was not finally reached
at that time on one aspect of the budget plan, concerning the Governor's
proposal for a comprehensive educational testing program.
On August 18, 1997, the Governor signed the Budget Act, but vetoed about
$314 million of specific spending items, primarily in health and welfare and
education areas from both the General Fund and Special Funds.
The Budget Act anticipates General Fund revenues and transfers of $52.5
billion (a 6.8 percent increase over the final 1996-97 amount), and
expenditures of $52.8 billion (an 8.0 percent increase from the 1996-97
levels). (The expenditure figure assumes restoration of $48 million of welfare
program savings which were contained in a bill vetoed by the Governor because
of other provisions and also assumes enactment of legislation to restore $203
million of expenditures associated with education upon agreement by the
Legislature and the Governor of a satisfactory testing program.) On a
budgetary basis, SFEU is projected to decrease from $408 million at June 30,
1997 to $112 million at June 30, 1998. The Budget Act also includes Special
Fund expenditures of $14.4 billion (as against estimated Special Fund revenues
of $14.0 billion), and $2.1 billion of expenditures from various Bond Funds.
The following are major features of the 1997-98 Budget Act:
1. For the second year in a row, the Budget contains a large increase
in funding for K-14 education under Proposition 98, reflecting strong
revenues which have exceeded initial budgeted amounts. Part of the nearly
$1.75 billion in increased spending is allocated to prior fiscal years.
Funds are provided to fully pay for the cost-of-living-increase component
of Proposition 98, and to extend the class size reduction and reading
initiatives. See "STATE FINANCES - Proposition 98" above.
2. The Budget Act reflects the $1.235 billion pension case judgment
payment, and brings funding of the State's pension contribution back to
the quarterly basis which existed prior to the deferral actions which were
invalidated by the courts. There is no provision for any additional
payment relating to this case.
3. Continuing the third year of a four-year "compact" which the
Administration has made with higher education units, funding from the
General Fund for the University of California and the California State
University system has increased by approximately 6 percent ($121 million
and $107 million, respectively). There was no increase in student fees.
4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels, adjusted for caseload changes.
5. Health and welfare costs are contained, continuing generally the
grant levels from prior years, as part of the initial implementation of
the new CalWORKs program.
6. Unlike prior years, this Budget Act does not depend on uncertain
federal budget actions. About $300 million in general funds, already
included in the federal FY 1997 and 1998 budgets, are included in the
Budget Act, to offset incarceration costs for illegal aliens.
7. The Budget Act contains no tax increases, and no tax reductions.
The Renters Tax Credit was suspended for another year, saving
approximately $500 million. The Legislature has not made any decision on
conformity of State tax laws to the recent federal tax reduction bill; a
comprehensive review of this subject is expected to take place next year.
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 transaction. 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.
In May 1996, a taxpayer action was filed against the City of San Diego
("San Diego") and the San Diego Convention Center Expansion Authority (the
"Authority") challenging the validity of a lease revenue financing involving a
lease (the "San Diego Lease") having features similar to the leases commonly
used in California lease-based financings such as certificates of
participation (the "Rider Case"). The Rider Case plaintiffs alleged that voter
approval is required for the San Diego Lease (a) since the lease constituted
indebtedness prohibited by Article XVI, Section 18 of the California
Constitution without a two-thirds vote of the electorate, and (b) since San
Diego was prohibited under its charter from issuing bonds without a two-thirds
vote of the electorate, and the power of the Authority, a joint powers'
authority, one of the members of which is San Diego, to issue bonds is no
greater than the power of San Diego. In response to San Diego's motion for
summary judgment, the trial court rejected the plaintiffs' arguments and ruled
that the San Diego Lease was constitutionally valid and that the Authority's
related lease revenue bonds did not require voter approval. The plaintiffs
appealed the matter to the Court of Appeals for the Fourth District, which
affirmed the validity of the San Diego Lease and of the lease revenue bond
financing arrangements. The plaintiffs then filed a petition for review with
the California State Supreme Court, and, on April 2, 1997, the Court granted
the plaintiff's petition for review. No decision from the Supreme Court is
expected prior to the Court's 1998 calendar year.
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.
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.
CONNECTICUT
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.
FLORIDA
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.
Despite increases in other sectors of its economy, Florida remains heavily
dependent on tourism. Three years ago State tourism was negatively impacted by
publicity regarding crime. In 1994, slightly less than 40 million persons
visited Florida on an annual basis. Subsequently, tourism has markedly
improved. In 1996-97, approximately 43 million visitors were recorded. The
forecast for 1997-98 is 44.6 million visitors, an increase of 3.7%. Estimates
for 1998-99 call for an additional 900,000 visitors to Florida, rising to 45.5
million annually.
There has been a decline in Florida's dependency on highly cyclical
construction and construction-related manufacturing sectors. For example, the
total contractor 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 1997, the share had edged downward to nearly 2.5%. 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.
MASSACHUSETTS
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, though the manufacturing sector has begun to
add jobs as well, up 1.2% since September 1996. Like most other industrial
states, Massachusetts has seen a shift in employment from manufacturing to
more technology and service-based industries. The unemployment rate for the
Commonwealth fell to 3.7% in October 1997 from 4.0% in January 1997.
1996 Fiscal Year. Fiscal 1996 statutory spending was $17.077 billion, $577
million less than budgeted. Revenues were $18.371 billion, $1.569 billion
better than budgeted. $446 million was added to the All Funds Fund Balance for
a total of $1.172 billion. The General Fund added $1.103 billion for a total
fund balance of $1.4 billion. On a GAAP basis, the General Fund balance is
$1.068 billion, $123 million of which is unreserved and undesignated.
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. The 1997 audit is not yet
available. The Commonwealth estimated 1997 spending at $17.704 billion, versus
$17.394 billion of revenues.
Major infrastructure projects are anticipated over the next decade. 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 expected cost of the Central Artery project is
over $11 billion. A majority of the Commonwealth's portion of funding is
expected to be provided by the Massachusetts Turnpike Authority, with a
smaller portion provided by the Massachusetts Port Authority. The federal
portion of the project was originally projected at 90%. However, increases in
project costs and a change in party control of Congress have raised the
question of how much the federal government will contribute. Resolution is
expected in the updated Transportation Bill (ISTEA) sometime in 1998. A
reduction in the federal contribution could increase pressure on the
Commonwealth and result in increased indebtedness. 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. While
the Commonwealth's economy has improved in the past few years, growth has been
largely concentrated in the eastern half of the state. Economic slowdown or
increased capital spending pressures could result in local aid reductions and,
in the absence of overrides . . . in an erosion of their market value.
MICHIGAN
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.
NEW JERSEY
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.
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.
NEW YORK
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
300,000 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. Government downsizing
has also moderated job gains. New York's economy is expected to continue to
expand during 1998, though at a slower pace than that of the U.S. The
unemployment rate for the State in October 1997 was 6.1%, up from 5.9% a year
ago, versus 4.4% for the nation. New York City's unemployment rate was 9.0% in
October 1997, up from 8.8% a year earlier. The increase in unemployment is
largely due to the labor force increasing at a faster rate than job growth.
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 1996-1997 fiscal year with an approximate General Fund
cash surplus of $1.4 billion as reported by the State Division of the Budget,
leaving a total fund balance of $433 million. The State closed a previously
projected budget gap of $3.9 billion. The surplus was due mainly to an
increase of tax revenues despite 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 mid-year update to the 1997-1998 State Financial Plan, issued by the
State on October 30, 1997, reflects a balanced 1997-1998 General Fund on a
cash basis. The State projects it has closed a potential budget gap of $2.3
billion for the 1997-1998 fiscal year. The State Comptroller, however, in a
September 11, 1997 report estimated that the State faces a potential imbalance
in receipts and disbursements of approximately $1.5 billion for the State's
1998-1999 fiscal year and approximately $3.4 billion for the State's 1999-2000
fiscal year.
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 1997 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 $1.2
billion, $2.7 billion and $2.6 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 federal and State aid, asset
sales, cost saving actions related to entitlement programs and procurement and
the availability of funds from the City's General Reserve. 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 $4.0 billion of general
obligation bonds and $7.3 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 but projects a ten
year need of $12 billion. Issuance above $7.5 billion would require further
legislative approval. 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. 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 A2, S&P A and Fitch A+. On July 17, 1997,
Moody's changed its outlook on City bonds to positive from stable. S&P
upgraded the bonds from A- in August 1997.
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. As of September 30,
1996, there were 17 public authorities that had outstanding debt of $100
million or more, and the aggregate outstanding debt, including refunding
bonds, all of State public authorities was $75.4 billion. 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.
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.
OHIO
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely 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, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture
is an important segment of the economy, with over half the State's area
devoted to farming and approximately 16% of total employment in agribusiness.
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 biennium ended June 30, 1995 with a GRF ending fund balance of $928
million, of which $535.2 million was transferred into the Budget Stabilization
Fund (BSF, a cash and budgetary management fund). The significant GRF fund
balance, after leaving in the GRF an unreserved and undesignated balance of
$70 million, was transferred to the BSF and other funds including school
assistance funds and, in anticipation of possible federal program changes, a
human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer network
purposes and $30 million to a new State transportation infrastructure fund.
Approximately $400.8 million served as a basis for temporary 1996 personal
income tax reductions aggregating that amount. The 1996-97 biennium-ending
GRF fund balance was $834.9 million. Of that, $250 million goes to school
building construction and renovation, $94 million to the school computer
network, $44.2 million for school textbooks and instructional materials and a
distance learning program, and $34 million to the BSF (which had a December 8,
1997 balance of $862.7 million), with the $263 million balance to a State
income tax reduction fund.
The GRF appropriations act for the 1997-98 biennium was passed on June 25,
1997 and promptly signed (after selective vetoes) by the Governor. All
necessary GRF appropriations for State debt service and lease rental payments
then projected for the biennium were included in that act.
Local school districts in Ohio receive a major portion (state-wide
aggregate approximately 44% in recent years) of their operating moneys from
State subsidiaries, but are dependent on local property taxes, and in 119
districts from voter-authorized income taxes, for significant portions of
their budgets. Litigation, similar to that in other states, has been pending
questioning the constitutionality of Ohio's system of school funding. The
Ohio Supreme Court has recently concluded that aspects of the system
(including basic operating assistance and the loan program referred to below)
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 March
1998) to permit time for responsive corrective actions. A small number of the
State's 612 local school districts have in any year required special
assistance to avoid year-end deficits. A program has provided for school
district cash need borrowing directly from commercial lenders, with diversion
of State subsidy distributions to repayment if needed. Recent borrowings
under this program totalled $41.1 million for 28 districts in FY 1994, $71.1
million for 29 districts in FY 1995 (including $29.5 million for one), $87.2
million for 20 districts in FY 1996 (including $42.1 million for one), and
$113.2 million for 12 districts in 1997 (including $90 million to one for
restructuring its prior loans).
For those few municipalities and school districts that on occasion have
faced significant financial problems, there are statutory procedures for a
joint State/local commission to monitor the fiscal affairs and for development
of a financial plan to eliminate deficits and cure any defaults. (Similar
procedures have recently been extended to counties and townships.) Since
inception for municipalities in 1979, these "fiscal emergency" procedures have
been applied to 24 cities and villages; for 18 of them the fiscal situation
was resolved and the procedures terminated (one village is in preliminary
"fiscal watch" status). As of December 8, 1997, the 1996 school district
"fiscal emergency" provision had been applied to five districts, and nine were
on preliminary "fiscal watch" status.
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.
PENNSYLVANIA
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 SAI, the City of Philadelphia's general obligations
are rated Ba, B and BB, by Moody's, S&P and Fitch, respectively.
<PAGE>
APPENDIX E: TAX EQUIVALENT YIELD TABLES
The tables below give the approximate yield a taxable security must earn
at various income brackets to produce after-tax yields equivalent to those of
tax exempt bonds yielding from 4% to 7% under the regular federal income tax
and applicable state and local tax rates applicable for 1997.
Note: The federal income tax portion of the indicated combined income tax
brackets in the tables does not take into account the effect of a reduction in
the deductibility of itemized deductions (including applicable state and local
taxes) for taxpayers with adjusted gross income in excess of $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 in the tables.
Yields shown are for illustration purposes only and are not meant to represent
a Fund's actual yield. No assurance can be given that any specific tax exempt
yield will be achieved. While it is expected that each Portfolio will invest
principally in obligations, the interest from which is exempt from the regular
federal income tax and applicable state and local taxes described in the
Prospectus, other income received by a Portfolio and allocated to a Fund may
be taxable. The tables do not take into account state or local taxes, if any,
payable on Fund distributions except for those described in the footnote to
the tables. Also, the interest earned on certain "private activity bonds"
issued after August 7, 1986, while exempt from the regular federal income tax,
is treated as a tax preference item which could subject the recipient to the
AMT. The illustrations assume that the AMT is not applicable and do not take
into account any tax credits that may be available.
The information set forth herein is as of the date of this SAI. Subsequent tax
law changes could result in prospective or retroactive changes in the tax
brackets, tax rates, and tax equivalent yields set forth above. Investors
should consult their tax adviser for additional information.
<TABLE>
<CAPTION>
CALIFORNIA
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 table is based on California State income tax laws and tax rates applicable for 1997. 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.
<CAPTION>
CONNECTICUT
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.
<CAPTION>
FLORIDA
YOU ARE IN
THIS
IF THE TAXABLE INCOME ON OR THE TAXABLE INCOME ON FEDERAL IN YOUR BRACKET, A TAX-FREE YIELD OF
YOUR SINGLE RETURN IS* YOUR JOINT RETURN IS* BRACKET 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------- -------------------------- ----------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQUALS THAT OF A TAXABLE INVESTMENT YIELDING
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>
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%
- ------------------------------ -------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TAX EQUIVALENT YIELD REFLECTING EXEMPTION FROM INTANGIBLES
TAX:**
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 on 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.
<CAPTION>
MASSACHUSETTS
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.
<CAPTION>
MICHIGAN
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.
<CAPTION>
NEW JERSEY
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.
<CAPTION>
NEW YORK
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%
- ---------------------------------------------- ------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
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.
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.
<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%
- ---------------------------------------------- ------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
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 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.
<CAPTION>
OHIO
COMBINED
SINGLE RETURN JOINT RETURN FEDERAL AND A FEDERAL AND OHIO STATE TAX EXEMPT YIELD OF:
- ----------------------- --------------------- OHIO STATE --------------------------------------------------------------------
(TAXABLE INCOME*) TAX BRACKET+ 4% 4.5% 5% 5.5% 6% 6.5% 7%
- ---------------------------------------------- ------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
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.
<CAPTION>
PENNSYLVANIA
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.
<PAGE>
APPENDIX F: RATINGS
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
- ----------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of a Portfolio's
fiscal year end.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short-term credit risk and long-term risk. Factors
effecting the liquidity of the borrower and short term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short-term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol
to reflect such characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be
limited to the external liquidity with no or limited legal recourse to the
issuer in the event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major 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 no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH/IBCA
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse change could cause these securities to be rated
below investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. Each Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
Investing
[GRAPHIC OMITTED] for the
21st
Century
- --------------------------------------------------------------------------------
EATON VANCE LIMITED MATURITY MUNICIPAL FUNDS
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1998
- --------------------------------------------------------------------------------
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
LTDSAI4/1
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
April 1, 1998
EATON VANCE
NATIONAL LIMITED MATURITY MUNICIPALS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information
about Eaton Vance National Limited Maturity Municipals Fund (the "Fund") and
National Limited Maturity Municipals Portfolio (the "Portfolio"). This
Statement of Additional Information is sometimes referred to herein as the
"SAI".
TABLE OF CONTENTS
Page
Additional Information about Investment Policies ..................... 2
Investment Restrictions .............................................. 7
Trustees and Officers ................................................ 9
Investment Adviser and Administrator ................................. 11
Custodian ............................................................ 13
Services for Accumulation -- Class A Shares .......................... 13
Service for Withdrawal ............................................... 14
Determination of Net Asset Value ..................................... 14
Investment Performance ............................................... 15
Taxes ................................................................ 16
Principal Underwriter ................................................ 18
Service Plan -- Class A Shares ....................................... 19
Distribution Plans -- Class B and Class C Shares ..................... 20
Portfolio Security Transactions ...................................... 21
Other Information .................................................... 23
Independent Certified Public Accountants ............................. 24
Financial Statements ................................................. 24
Appendix A: Class A Shares ........................................... a-1
Appendix B: Class B Shares ........................................... b-1
Appendix C: Class C Shares ........................................... c-1
Appendix D: Tax Equivalent Yield Table ............................... d-1
Appendix E: Ratings .................................................. e-1
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 APRIL 1, 1998, 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>
This SAI provides information about the Fund and the Portfolio.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the 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 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 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.
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 governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. State debt-issuance limitations are deemed to be inapplicable to
these arrangements because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. Such arrangements are, therefore, subject to the risk
that the governmental issuer will not appropriate funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be deemed
illiquid for 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 cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual portfolio turnover rate will generally not exceed
100% (excluding turnover of securities having a maturity of one year or less).
A 100% annual turnover rate could occur, for example, if all the securities
held by 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 each of the fiscal years ended March
31, 1997 and 1996, the portfolio turnover rate of the Portfolio was 68%.
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. 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 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. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned,
which will be marked to market daily. Cash equivalents include short-term
municipal obligations as well as taxable certificates of deposit, commercial
paper and other short-term money market instruments. The Portfolio would have
the right to call a loan and obtain the securities loaned at any time on up to
five business days' notice. During the existence of a loan, the Portfolio will
continue to receive the equivalent of the interest paid by the issuer on the
securities loaned and will also receive a fee, or all or a portion of the
interest on investment of the collateral, if any. However, the Portfolio may
pay lending fees to such borrowers. The Portfolio would not have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
will be made only to organizations deemed by the Portfolio's management to be
of good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, 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 or as a substitute for the
purchase of securities, 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 or non-hedging purposes as defined in or
permitted by CFTC regulations. The Portfolio will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Portfolio or which it expects to purchase. 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
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 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 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.
DIVERSIFIED STATUS
The Portfolio is a "diversified" investment company under the 1940 Act.
This means that with respect to 75% of its total assets (1) the Portfolio may
not invest more than 5% of its total assets in the securities of any one
issuer (except U.S. Government obligations) and (2) the Portfolio may not own
more than 10% of the outstanding voting securities of any one issuer (which
generally is inapplicable because municipal debt obligations are not voting
securities).
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.
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 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;
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 and may not invest more than 15% of net assets in illiquid securities.
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). Director or Trustee of various investment companies managed by
Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (56), Vice President and Trustee*
Chairman, 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 (63), 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 (62), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (71), 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 (68), 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 (54), 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 (41), Vice President
Vice President of BMR, 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 (57), 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 (62), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), 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 BMR, Eaton Vance and EV 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.
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. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
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 Trust, the Portfolio,
and the funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- ------------
Donald R. Dwight ..... $3,223 $1,557(3) $145,000(6)
Samuel L. Hayes, III . 2,922 1,808(4) 155,000(7)
Norton H. Reamer ..... 2,903 1,687 145,000
John L. Thorndike .... 2,990 1,818(5) 148,750(8)
Jack L. Treynor ...... 3,209 1,796 150,000
(1) As of April 1, 1998, the Eaton Vance fund complex consists of 143
registered investment companies or series thereof.
(2) The Trust consisted of 23 Funds as of March 31, 1997.
(3) Includes $686 of deferred compensation.
(4) Includes $312 of deferred compensation.
(5) Includes $917 of deferred compensation.
(6) Includes $47,187 of deferred compensation.
(7) Includes $19,062 of deferred compensation.
(8) Includes $55,276 of deferred compensation.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $22 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 a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $23 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 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. A staff of 28 (including 6 portfolio
managers and 9 credit specialists) is responsible for the day-to-day
management of over 3,500 issues in 46 mutual fund portfolios. Assets managed
by the municipal investment group are currently over $7.6 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 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.
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 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 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 Administrative Services Agreement with the
Trust, 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 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, John M. Nelson and Ralph Z. Sorenson. Mr. Hawkes is chairman, president
and chief executive officer and Mr. Gardner is vice chairman 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, the Voting Trustees of which are Messrs.
Gardner, Hawkes and Rowland and Alan R. Dynner, Thomas E. Faust, Jr., William
M. Steul and Wharton P. Whitaker. The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting
trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers or officers and
Directors of EVC and EV. As of March 31, 1998, Messrs. Gardner and Hawkes each
owned 24% of such voting trust receipts, Messrs. Rowland and Faust owned 15%
and 13%, respectively, and Messrs. Dynner, Steul and Whitaker owned 8%.
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 approximately 21% 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 Trust and the Portfolio. IBT also provides
services in connection with the preparation of shareholder reports and the
electronic filing of such reports with the Commission.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
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 Class A shares and shares of other funds
exchangeable for Class A shares and listed under "The Eaton Vance Exchange
Privilege" in the Prospectus 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. For sales charges and other information on quantity purchases,
see "How to Buy Shares" in the Prospectus. 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 Class A shares is calculated by taking
the dollar amount of the current purchase and adding it to the value
(calculated at the maximum current offering price) of the Class A shares the
shareholder owns in his or her account(s) in the Fund and shares of other
funds exchangeable for Class A shares and listed under "The Eaton Vance
Exchange Privilege" in the Prospectus. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. For sales
charges on quantity purchases, see "How to Buy Shares" in the Prospectus.
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.
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 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 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 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, Martin Luther King, Jr. 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 separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes, (i) that all distributions
are reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum initial sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of any CDSC at the end of the period. For
information concerning the total return of the Classes of the Fund, see
Appendix A, Appendix B and Appendix C.
Yield is computed separately for each Class of the Fund 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 the
maximum initial sales charge for Class A shares) per share on the last day of
the period and annualizing the resulting figure. Net investment income per
share is calculated from the yields to maturity of all debt obligations held
by the Portfolio based on prescribed methods, reduced by accrued Fund and
Class expenses for the period with the resulting number being divided by the
average daily number of Class shares outstanding and entitled to receive
distributions during the period. The yield figure does not reflect the
deduction of any CDSCs which (if applicable) are imposed on certain
redemptions at the rates set forth under "How to Redeem Shares" in the
Prospectus. Yield calculations assume the current maximum sales charge for
Class A shares set forth under "How to Buy Shares" in the 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 Classes
of the Fund, see Appendix A, Appendix B and Appendix C.
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 Trust (or Principal Underwriter) 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 Trust may also refer in
investor publications to Tax Freedom Day, as computed by the Tax Foundation,
Washington, DC 20005, to help illustrate the value of tax free investing, as
well as other tax-related information. Information, charts and illustrations
showing the effects of inflation and taxes (including their 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.
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 Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. 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 Portfolio and, in order to enable the Fund to distribute its
proportionate share of this income and avoid a tax payable by the Fund, the
Portfolio may be required to liquidate portfolio securities that it might
otherwise have continued to hold in order to generate cash that the Fund may
withdraw from the for subsequent distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent 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 Portfolio'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, 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 period 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.
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 notification 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.
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.
PRINCIPAL UNDERWRITER
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Trust will
exceed the amounts paid therefor. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent, see Appendix B.
CLASS A SHARES. Class A shares of the Fund may be continuously purchased
at the public offering price through Authorized Firms which have agreements
with the Principal Underwriter. The Trust reserves the right to suspend or
limit the offering of its shares to the public at any time. 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 Prospectus (see "How to Buy 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
Class A shares pursuant to a written Statement of Intention; or (2) purchases
of Class A shares pursuant to the Right of Accumulation and declared as such
at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares
for the assets of such investment company. Class A shares may be sold at net
asset value to any officer, director, trustee, general partner or employee of
the Trust, 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. Class A shares 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 Principal Underwriter acts as principal in selling Class A shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares 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 Class A 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. 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.
CLASS B AND CLASS C SHARES. Under the Distribution Agreement, the
Principal Underwriter acts as principal in selling Class B and Class C shares.
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, each Class B and Class C makes payments to the Principal Underwriter
pursuant to their Distribution Plans as described in the 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 Distribution Plans or the Distribution Agreement), may be terminated on
sixty days' notice either by such Trustees or by vote of a majority of the
outstanding Class B and Class C shares or on six months' notice by the
Principal Underwriter and is automatically terminated upon assignment. The
Principal Underwriter distributes Class B and Class C shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of its Class A shares has adopted 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 "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 Prospectus.
The Plan remains in effect from year to year provided such continuance is
approved by a 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 the Plan Trustees or by a vote of a majority of the outstanding Class
A shares of the Fund. The Plan was approved by the Trustees, including the
Plan Trustees, on June 23, 1997.
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 affected shareholders of Class A
shares 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 will benefit the Fund and its Class A
shareholders.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C shares 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
Plans is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B and Class C shares.
The Plans provide 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 B or Class C 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 Class B
sales and 6.25% of Class C sales 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 Plans as
sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the respective Class and will
accordingly reduce the net assets of the Class upon such accrual, all in
accordance with generally accepted accounting principles. The amount payable
on each day is limited to 1/365 of .75% of the net assets of the Class on
such day. The level of net assets changes each day and depends upon the amount
of sales and redemptions of shares, the changes in the value of the
investments held by the Portfolio, the expenses of the Class, the Fund and the
Portfolio accrued and allocated to the Fund and Class 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
Trust does not accrue possible future payments as a liability of a Class or
reduce a Class's current net assets in respect of unknown amounts which may
become payable under the Plans in the future because the standards for accrual
of such a liability under accounting principles have not been satisfied.
The Plans provide 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 Trust 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 Plans since their inception. Payments theretofore paid or
payable under the Plans by the Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through Authorized Firms), the level and timing of redemptions of shares upon
which a CDSC will be imposed, the level and timing of redemptions of shares
upon which no CDSC will be imposed (including redemptions of shares pursuant
to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Plans. Periods with a high level of sales of Class shares
accompanied by a low level of early redemptions of Class 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 0.90% of a Class's average daily net assets per annum.
For actual payments made and the outstanding uncovered distribution charges of
the Principal Underwriter, see Appendix B. The Trust believes that the
combined rate of all these payments may be higher than the rate of payments
made under distribution plans adopted by other investment companies pursuant
to Rule 12b-1. Although the Principal Underwriter will use its own funds
(which may be borrowed from banks) to pay sales commissions and service fees
for Class C sales and sales commissions for Class B sales at the time of sale,
it is anticipated that the Eaton Vance organization will profit by reason of
the operation of the Plans through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plans and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing Class B and Class C
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Trust.
The Plans continue 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 Plans
and Distribution Agreements 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 applicable Class. The Plans require
quarterly Trustee review of a written report of the amount expended under the
Plans and the purposes for which such expenditures were made. The Plans may
not be amended to increase materially the payments described therein without
approval of the shareholders of the affected Class and the Trustees. So long
as the Plans are in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees. Each Plan was
approved by the Trustees, including the Rule 12b-1 Trustees, on June 23, 1997.
The Trustees of the Trust believe that the Plans 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 Class B and Class C shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plans will compensate the Principal Underwriter for its
services and expenses in distributing Class B and Class C shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plans 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 Plans are
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 Plans will benefit the Fund and its Class B and
Class C shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the
executing firm, the reputation, reliability, experience and financial
condition of the firm, the value and quality of the services rendered by the
firm in this and other transactions, and the reasonableness of the spread or
commission, if any. Municipal obligations, including state oligations,
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 either on the basis of that
particular transaction or on the basis of overall responsibilities which BMR
and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, 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 broker-dealer 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. The Fund established multiple
classes of shares on June 27, 1996. The operations of Class A and Class B
reflect the operations of Class II and Class I of the Fund prior to such date.
Class C is the successor to the operations of a separate series of the Trust.
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
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 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
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 the unaudited financial statements of the Fund and
the Portfolio appear in the Fund's most recent semiannual report to
shareholders, both of which are incorporated by reference into this SAI. A
copy of the Fund's semiannual and annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
EV Marathon National Limited Maturity Municipals Fund and National Limited
Maturity Municipals Portfolio for the fiscal year ended March 31, 1997 and the
unaudited financial information for the six-months ended September 30, 1997,
as previously filed electronically with the Commission (Accession No.
0000950109-97-004456) and (Accession No. 0000950109-97-007433), respectively.
<PAGE>
APPENDIX A: CLASS A SHARES
FEES AND EXPENSES
SERVICE PLAN
During the fiscal year ended March 31, 1997, Class A (formerly Class II)
made service fee payments to the Principal Underwriter and Authorized Firms
aggregating $10,522, of which $10,153 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment in shares of $1,000. Total return for the period prior
to June 27, 1996 reflects the total return of Class B adjusted to reflect the
Class A sales charge. The Class B total return has not been adjusted to
reflect certain other expenses (such as distribution and/or service fees). If
such adjustments were made, the Class A total return would be different. The
"Value of Initial Investment" reflects the deduction of the maximum sales
charge of 2.25%. Past performance is not indicative of future results.
Investment return and principal value will fluctuate; shares, when redeemed,
may be worth more or less than their original cost. Information presented with
two asterisks (**) includes the effect of subsidizing expenses. Returns would
have been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------- ------------- -------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 5/22/92 $977.56 $1,319.02 34.93% 5.75% 31.91% 5.30%
5 Years Ended
9/30/97** 9/30/92 $977.52 $1,269.41 29.86% 5.36% 26.94% 4.89%
1 Year Ended
9/30/97** 9/30/96 $977.30 $1,048.85 7.32% 7.32% 4.88% 4.88%
- ----------
*Predecessor Fund commenced operations June 3, 1994.
</TABLE>
For the thirty-day period ended September 30, 1997, the yield of Class A
shares was 4.82%. The yield required of a taxable security that would produce
an after-tax yield equivalent to 4.82% would be 7.53%, assuming a federal rate
of 36%. If the Portfolio's or the Fund's expenses had not been subsidized,
yield would be lower.
See the Tax Equivalent Yield Table in Appendix D to this SAI for
information concerning applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 2, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class A shares of the
Fund. As of March 2, 1998, Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL was the record owner of approximately 23.3% of the outstanding Class A
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 Class A shares as of such
date.
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1998 and may be continued as described under "Distribution Plans --
Class B and Class C shares". 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. During the fiscal year
ended March 31, 1997, the Principal Underwriter paid to Authorized Firms sales
commissions of $33,757 on sales of Class B Shares (formerly Class I) 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, Class B made service fee
payments to the Principal Underwriter and Authorized Firms aggregating $133,657
of which $132,950 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 $1,667.50 for repurchase transactions handled by the Principal
Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the 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. Information presented with two
asterisks (**) includes the effect of subsidizing expenses. Returns would have
been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVEST- 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 9/30/97 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 5/22/92 $1,000 $1,316.23 $1,316.23 31.62% 5.26% 31.62% 5.26%
5 Years
Ended
9/30/97** 9/30/92 $1,000 $1,266.67 $1,266.67 26.67% 4.84% 26.67% 4.84%
1 Year
Ended
9/30/97 9/30/96 $1,000 $1,065.66 $1,035.66 6.57% 6.57% 3.57% 3.57%
- ----------
* Investment operations began on May 22, 1992.
</TABLE>
For the thirty-day period ended September 30, 1997, the yield of Class B
shares was 4.82%. The yield required of a taxable security that would produce
an after-tax yield equivalent to that earned by the Fund of 4.82% would be
7.53%, assuming a federal tax rate of 36%. If the Portfolio's or the Fund's
expenses had not been subsidized, yield would be lower.
See the Tax Equivalent Yield Table in Appendix D for information
concerning applicable tax rates and income brackets.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 2, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of March 2, 1998, Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL was the record owner of approximately 13.3% of the outstanding Class B
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 Class B shares as of such
date.
<PAGE>
APPENDIX C: CLASS C SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to April 1, 1998 reflects the total return of the predecessor to Class
C. Total return prior to December 8, 1993 reflects the total return of Class
B, adjusted to reflect the Class C sales charge. The Class B total return has
not been adjusted to reflect certain other expenses (such as distribution and/
or service fees). If such adjustments were made, the Class C total return
would be different. Past performance is not indicative of future results.
Investment return and principal value will fluctuate; shares, when redeemed,
may be worth more or less than their original cost. Information presented with
two asterisks (**) includes the effect of subsidizing expenses. Returns would
have been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC -------------------------- --------------------------
PERIOD* DATE INVESTMENT ON 9/30/97 ON 9/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ------------ --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund** 5/22/92 $1,000 $1,302.65 $1,302.65 30.26% 5.06% 30.26% 5.06%
5 Years
Ended
9/30/97** 9/30/92 $1,000 $1,253.63 $1,253.63 25.36% 4.62% 25.36% 4.62%
1 Year
Ended
9/30/97** 9/30/96 $1,000 $1,060.59 $1,050.59 6.06% 6.06% 5.06% 5.06%
- ------------
* Predecessor Fund commenced operations on December 8, 1993.
</TABLE>
See the Tax Equivalent Yield Table in Appendix D to this SAI for
information concerning applicable tax rates and income brackets.
<PAGE>
APPENDIX D: 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 to those of tax-exempt
bonds yielding from 4% to 7% under the regular federal income tax laws and tax
rates applicable to 1998.
<TABLE>
<CAPTION>
MARGINAL
SINGLE RETURN JOINT RETURN INCOME TAX-EXEMPT YIELD
- --------------------- ------------------- TAX --------------------------------------------------------------------------
(TAXABLE INCOME)* BRACKET 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 $ 25,350 Up to $ 42,350 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 25,351-$ 61,400 $ 42,351-$102,300 28.00 5.56 6.25 6.94 7.64 8.33 9.03 9.72
$ 61,401-$128,100 $102,301-$155,950 31.00 5.80 6.52 7.25 7.97 8.70 9.42 10.14
$128,101-$278,450 $155,951-$278,450 36.00 6.25 7.03 7.81 8.59 9.38 10.16 10.94
Over $278,450 Over $278,450 39.60 6.62 7.45 8.28 9.11 9.93 10.76 11.59
- ------------------------------------------ ----------- --------------------------------------------------------------------------
* 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 $124,500. The tax brackets also do not show the effects
of phase out of personal exemptions for single filers with adjusted gross incomes in excess of $124,500 and joint filers with
adjusted gross income in excess of $186,800. The effective tax brackets and equivalent taxable yields of such taxpayers will be
higher than those indicated above.
</TABLE>
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
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 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>
APPENDIX E: RATINGS
DESCRIPTION OF SECURITIES RATINGS+
MOODY'S INVESTORS SERVICE, INC.
MUNICIPAL BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
- ----------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the
Portfolio's fiscal year end.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
MUNICIPAL SHORT-TERM OBLIGATIONS
RATINGS: Moody's ratings for state and municipal short-term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short-term credit risk and long-term risk. Factors
effecting the liquidity of the borrower and short term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short term rating may also be assigned on an issue having a demand feature,
variable rate demand obligation (VRDO). Such ratings will be designated as
VMIG1, SG or if the demand feature is not rated, NR. A short-term rating on
issues with demand features are differentiated by the use of the VMIG1 symbol
to reflect such characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be
limited to the external liquidity with no or limited legal recourse to the
issuer in the event the demand is not met.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major 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 no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
S&P note ratings reflect the liquidity concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.
Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Sources of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH/IBCA
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified that could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Stong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse change could cause these securities to be rated
below investment grade.
* * * * * * * *
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. 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>
Investing
[GRAPHIC OMITTED] for the
21st
Century
- --------------------------------------------------------------------------------
EATON VANCE NATIONAL LIMITED MATURITY MUNICIPALS FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1998
- --------------------------------------------------------------------------------
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
LNASAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS*
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FOR THE PERIOD FROM THE START OF BUSINESS TO THE FISCAL
YEAR ENDED MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED SEPTEMBER 30,
1997 (UNAUDITED):
Eaton Vance California Limited Maturity Municipals Fund (start of
business May 29, 1992)
Eaton Vance Connecticut Limited Maturity Municipals Fund (start of
business April 16, 1993)
Eaton Vance Florida Limited Maturity Municipals Fund (start of
business May 29, 1992)
Eaton Vance Massachusetts Limited Maturity Municipals Fund (start
of business June 1, 1992)
Eaton Vance Michigan Limited Maturity Municipals Fund (start of
business April 16, 1993)
Eaton Vance New Jersey Limited Maturity Municipals Fund (start of
business June 1, 1992)
Eaton Vance New York Limited Maturity Municipals Fund (start of
business May 29, 1992)
Eaton Vance Ohio Limited Maturity Municipals Fund (start of
business April 16, 1993)
Eaton Vance Pennsylvania Limited Maturity Municipals Fund (start
of business June 1, 1992)
Eaton Vance National Limited Maturity Municipals Fund (start of
business May 22, 1992)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE SEMI- ANNUAL REPORTS FOR THE FOLLOWING FUNDS DATED
SEPTEMBER 30, 1997 (WHICH WERE PREVIOUSLY FILED ELECTRONICALLY
PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
(Accession No. 0000950156-97-000989)
Eaton Vance National Limited Maturity Municipals Fund
(Accession No. 0000950109-97-007433)
THE FINANCIAL STATEMENTS CONTAINED IN EACH FUND'S SEMI-ANNUAL REPORT
ARE AS FOLLOWS:
Statements of Assets and Liabilities (Unaudited)
Statements of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Financial Highlights (Unaudited)
Notes to Financial Statements (Unaudited)
- ------------
*Eaton Vance California Limited Maturity Municipals Fund was previously known
as EV Marathon California Limited Maturity Municipals Fund; Eaton Vance
Connecticut Limited Maturity Municipals Fund was previously known as EV
Marathon Connecticut Limited Maturity Municipals Fund; Eaton Vance Florida
Limited Maturity Municipals Fund was previously known as EV Marathon Florida
Limited Maturity Municipals Fund; Eaton Vance Massachusetts Limited Maturity
Municipals Fund was previously known as EV Marathon Massachusetts Limited
Maturity Municipals Fund; Eaton Vance Michigan Limited Maturity Municipals
Fund was previously known as EV Marathon Michigan Limited Maturity Municipals
Fund; Eaton Vance National Limited Maturity Municipals Fund was previously
known as EV Marathon National Limited Maturity Municipals Fund; Eaton Vance
New Jersey Limited Maturity Municipals Fund was previously known as EV
Marathon New Jersey Limited Maturity Municipals Fund; Eaton Vance New York
Limited Maturity Municipals Fund was previously known as EV Marathon New York
Limited Maturity Municipals Fund; Eaton Vance Ohio Limited Maturity
Municipals Fund was previously known as EV Marathon Ohio Limited Maturity
Municipals Fund; and Eaton Vance Pennsylvania Limited Maturity Municipals
Fund was previously known as EV Marathon Pennsylvania Limited Maturity
Municipals Fund.
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):
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
(Accession No. 0000950156-97-000905)
Eaton Vance National Limited Maturity Municipals Fund
(Accession No. 0000950109-97-004456)
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 SEMI-ANNUAL REPORTS DATED SEPTEMBER 30,
1997 OF THE CORRESPONDING FUNDS:
Portfolio of Investments (Unaudited)
Statements of Assets and Liabilities (Unaudited)
Statements of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Supplementary Data (Unaudited)
Notes to Financial Statements (Unaudited)
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 dated June 23, 1997 to Declaration of Trust filed herewith.
(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) Distribution Agreement between Registrant and Eaton Vance
Distributors, Inc. dated June 23, 1997 filed herewith.
(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)(a) 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.
(1) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement dated June 19, 1995 filed herewith.
(b) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853, 811-08671)
(Accession No. 0000950156-98-000172) and incorporated herein by
reference.
(10) Opinion of Internal Counsel filed herewith.
(11)(a) Consent of Independent Auditors of Eaton Vance Investment Trust on
behalf of Eaton Vance California Limited Maturity Municipals Fund,
Eaton Vance Connecticut Limited Maturity Municipals Fund, Eaton Vance
Florida Limited Maturity Municipals Fund, Eaton Vance Massachusetts
Limited Maturity Municipals Fund, Eaton Vance Michigan Limited
Maturity Municipals Fund, Eaton Vance New Jersey Limited Maturity
Municipals Fund, Eaton Vance New York Limited Maturity Municipals
Fund, Eaton Vance Ohio Limited Maturity Municipals Fund and Eaton
Vance Pennsylvania Limited Maturity Municipals Fund filed herewith.
(b) Consent of Independent Auditors of Eaton Vance Investment Trust on
behalf of Eaton Vance National Limited Maturity Municipals Fund filed
herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15)(a) Eaton Vance Investment Trust Class A Service Plan adopted June 23,
1997 with attached schedule filed herewith.
(b) Eaton Vance Investment Trust Class B Distribution Plan adopted June
23, 1997 with attached schedule filed herewith.
(c) Eaton Vance Investment Trust Class C Distribution Plan adopted June
23, 1997 with attached schedule filed herewith.
(16) Schedules for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Investment Trust dated April 22,
1997 filed as Exhibit (17)(a) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(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 as Exhibit (17)(b) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(18) Multiple-Class Plan for Eaton Vance Funds dated June 23, 1997 filed
herewith.
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 February 28, 1998
<S> <C>
EV Classic Florida Limited Maturity Municipals Fund 68
EV Classic Massachusetts Limited Maturity Municipals Fund 67
EV Classic National Limited Maturity Municipals Fund 216
EV Classic New York Limited Maturity Municipals Fund 64
EV Classic Pennsylvania Limited Maturity Municipals Fund 82
EV Marathon California Limited Maturity Municipals Fund -- Class I 182
EV Marathon California Limited Maturity Municipals Fund -- Class II 578
EV Marathon Connecticut Limited Maturity Municipals Fund -- Class I 93
EV Marathon Connecticut Limited Maturity Municipals Fund -- Class II 158
EV Marathon Florida Limited Maturity Municipals Fund -- Class I 253
EV Marathon Florida Limited Maturity Municipals Fund -- Class II 1,216
EV Marathon Massachusetts Limited Maturity Municipals Fund -- Class I 397
EV Marathon Massachusetts Limited Maturity Municipals Fund -- Class II 1,313
EV Marathon Michigan Limited Maturity Municipals Fund -- Class I 89
EV Marathon Michigan Limited Maturity Municipals Fund -- Class II 328
EV Marathon National Limited Maturity Municipals Fund -- Class I 333
EV Marathon National Limited Maturity Municipals Fund -- Class II 1,370
EV Marathon New Jersey Limited Maturity Municipals Fund -- Class I 387
EV Marathon New Jersey Limited Maturity Municipals Fund -- Class II 1,231
EV Marathon New York Limited Maturity Municipals Fund -- Class I 543
EV Marathon New York Limited Maturity Municipals Fund -- Class II 1,762
EV Marathon Ohio Limited Maturity Municipals Fund -- Class I 132
EV Marathon Ohio Limited Maturity Municipals Fund -- Class II 454
EV Marathon Pennsylvania Limited Maturity Municipals Fund -- Class I 394
EV Marathon Pennsylvania Limited Maturity Municipals Fund -- Class II 1,354
EV Traditional California Limited Maturity Municipals Fund 46
EV Traditional Connecticut Limited Maturity Municipals Fund 22
EV Traditional Florida Limited Maturity Municipals Fund 23
EV Traditional Michigan Limited Maturity Municipals Fund 34
EV Traditional National Limited Maturity Municipals Fund 51
EV Traditional New Jersey Limited Maturity Municipals Fund 38
EV Traditional New York Limited Maturity Municipals Fund 14
EV Traditional Ohio Limited Maturity Municipals Fund 39
</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:
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
<TABLE>
(b)
<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
Albert F. Barbaro Vice President 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
Richard Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
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
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Teresa A. Sheehan Vice President None
David C. Sturgis Vice President None
Cornelius J. Sullivan Senior 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
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116 and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody 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 24th day of March,
1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
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 24th day of March, 1998.
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) March 24, 1998
- --------------------------------------
THOMAS J. FETTER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer March 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee March 20, 1998
- --------------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee March 24, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee March 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
---------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
<S> <C>
(1)(b) Amendment dated June 23, 1997 to Declaration of Trust.
(6)(a) Distribution Agreement between Eaton Vance Investment Trust and Eaton
Vance Distributors, Inc. dated June 23, 1997.
(9)(b) Amendment to Schedule A dated June 23, 1997 of Amended Administrative
Services Agreement.
(10) Opinion of Internal Counsel.
(11)(a) Consent of Independent Auditors of Eaton Vance Investment
Trust on behalf of Eaton Vance California Limited Maturity
Municipals Fund, Eaton Vance Connecticut Limited Maturity
Municipals Fund, Eaton Vance Florida Limited Maturity
Municipals Fund, Eaton Vance Massachusetts Limited
Maturity Municipals Fund, Eaton Vance Michigan Limited
Maturity Municipals Fund, Eaton Vance New Jersey Limited
Maturity Municipals Fund, Eaton Vance New York Limited
Maturity Municipals Fund, Eaton Vance Ohio Limited
Maturity Municipals Fund and Eaton Vance Pennsylvania
Limited Maturity Municipals Fund dated March 23, 1998.
(b) Consent of Independent Auditors of Eaton Vance Investment Trust on behalf
of Eaton Vance National Limited Maturity Municipals Fund dated March 23,
1998.
(15)(a) Class A Service Plan adopted June 23, 1997.
(b) Class B Distribution Plan adopted June 23, 1997.
(c) Class C Distribution Plan adopted June 23, 1997.
(16) Schedules for Computation of Performance Quotations.
(18) Multiple-Class Plan for Eaton Vance Funds dated June 23, 1997.
</TABLE>
<PAGE>
Exhibit 1(b)
EATON VANCE INVESTMENT TRUST
Amendment dated June 23, 1997 to Declaration of Trust
WHEREAS, the Trustees of Eaton Vance Investment Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, in connection with a reorganization of the Funds the Trustees
now desire to rename certain of the Funds, establish and designate classes of
shares for such Funds, and terminate certain other Funds effective with the end
of their current fiscal year ends pursuant to the Trust's Amended and Restated
Declaration of Trust dated January 11, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby:
1. Rename the Funds effective April 1, 1998 listed below as follows:
Eaton Vance California Limited Maturity Municipals Fund
(formerly EV Marathon California Limited Maturity Municipals Fund)
Eaton Vance Connecticut Limited Maturity Municipals Fund
(formerly EV Marathon Connecticut Limited Maturity Municipals Fund)
Eaton Vance Florida Limited Maturity Municipals Fund
(formerly EV Marathon Florida Limited Maturity Municipals Fund)
Eaton Vance Massachusetts Limited Maturity Municipals Fund
(formerly EV Marathon Massachusetts Limited Maturity Municipals Fund)
Eaton Vance Michigan Limited Maturity Municipals Fund
(formerly EV Marathon Michigan Limited Maturity Municipals Fund)
Eaton Vance National Limited Maturity Municipals Fund
(formerly EV Marathon National Limited Maturity Municipals Fund)
Eaton Vance New Jersey Limited Maturity Municipals Fund
(formerly EV Marathon New Jersey Limited Maturity Municipals Fund)
Eaton Vance New York Limited Maturity Municipals Fund
(formerly EV Marathon New York Limited Maturity Municipals Fund)
Eaton Vance Ohio Limited Maturity Municipals Fund
(formerly EV Marathon Ohio Limited Maturity Municipals Fund)
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
(formerly EV Marathon Pennsylvania Limited Maturity Municipals Fund)
2. Each Fund shall have new classes of shares established and
designated as Class C and Class I shares, Class I shares shall be redesignated
Class B shares, Class II shares shall be redesignated Class A shares, all on
April 1, 1998, and the Trustees may designate additional classes in the future.
For purposes of allocating liabilities among classes, each class of a series
shall be treated in the same manner as a separate series.
3. All series of Trust with the designation "Traditional" or "Classic"
shall be terminated on April 1, 1998.
Dated: June 23, 1997
/s/ Donald R. Dwight
- ---------------------------------- /s/ Norton H. Reamer
Donald R. Dwight ----------------------------------
Norton H. Reamer
/s/ James B. Hawkes
- ---------------------------------- /s/ John L. Thorndike
James B. Hawkes ----------------------------------
John L. Thorndike
/s/ Samuel L. Hayes, III
- ---------------------------------- /s/ Jack L. Treynor
Samuel L. Hayes, III ----------------------------------
Jack L. Treynor
<PAGE>
Exhibit 6(a)
EATON VANCE INVESTMENT TRUST
DISTRIBUTION AGREEMENT
AGREEMENT effective June 23, 1997 between EATON VANCE INVESTMENT TRUST,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Trust," on behalf
of each of its series listed on Schedule A (a "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston, hereinafter sometimes called the "Principal
Underwriter." The Trustees of the Trust have established four classes of shares
of each of the Funds, such classes having been designated Class A, Class B,
Class C and Class I (the "Classes").
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
all classes of shares of the Fund upon the terms hereinbelow set forth during
the term of this Agreement. While this Agreement is in force, the Principal
Underwriter agrees to use its best efforts to find purchasers for shares of the
Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for Class A shares so purchased shall
be the net asset value used in determining the public offering price on which
such orders were based; the price for Class B, Class C and Class I shares so
purchased shall be equal to the price paid by investors upon purchasing such
shares. The Principal Underwriter shall notify Investors Bank & Trust Company,
Custodian of the Trust ("IBT"), and First Data Investor Services Group, Transfer
Agent of the Trust ("First Data"), or a successor transfer agent, at the end of
each business day, or as soon thereafter as the orders placed with it have been
compiled, of the number of shares and the prices thereof which the Principal
Underwriter is to purchase as principal for resale. The Principal Underwriter
shall take down and pay for shares ordered from the Fund on or before the
eleventh business day (excluding Saturdays) after the shares have been so
ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
CLASS A SHARES. The public offering price, i.e., the price per Class A
share at which the Principal Underwriter or financial service firm purchasing
shares from the Principal Underwriter may sell shares to the public, shall be
the public offering price as set forth in the current Prospectus relating to
said Class A shares, but not to exceed the net asset value at which the
Principal Underwriter is to purchase the Class A shares, plus a sales charge not
to exceed 7.25% of the public offering price (the net asset value divided by
.9275). If the resulting public offering price does not come out to an even
cent, the public offering price shall be adjusted to the nearer cent.
The Principal Underwriter may also sell Class A shares at the net asset
value at which the Principal Underwriter is to purchase such Class A shares,
provided such sales are not inconsistent with the provisions of Section 22(d) of
the Investment Company Act of 1940, as amended from time to time (the "1940
Act"), and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
CLASS B, CLASS C AND CLASS I SHARES. The public offering price, i.e.,
the price per Class B, Class C and Class I shares at which the Principal
Underwriter or financial service firm purchasing shares from the Principal
Underwriter may sell shares to the public, shall be equal to the net asset value
at which the Principal Underwriter is to purchase the Class B, Class C and Class
I shares.
The net asset value of shares of each Class of the Fund shall be
determined by the Trust or IBT, as the agent of the Trust, as of the close of
regular trading on the New York Stock Exchange (the "Exchange") on each business
day on which said Exchange is open, or as of such other time on each such
business day as may be determined by the Trustees of the Trust, in accordance
with the methodology and procedures for calculating such net asset value
authorized by the Trustees. The Trust may also cause the net asset value to be
determined in substantially the same manner or estimated in such manner and as
of such other time or times as may from time to time be agreed upon by the Trust
and Principal Underwriter. The Trust will notify the Principal Underwriter each
time the net asset value of a Class of shares is determined and when such value
is so determined it shall be applicable to transactions as set forth in the
current Prospectus(es) and Statement(s) of Additional Information (hereafter the
"Prospectus") relating to the Fund's shares.
No Class of shares of the Fund shall be sold by the Fund during any
period when the determination of that Class's net asset value is suspended
pursuant to the Declaration of Trust, except to the Principal Underwriter, in
the manner and upon the terms above set forth to cover contracts of sale made by
the Principal Underwriter with its customers prior to any such suspension, and
except as provided in paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of any Class of shares if in the judgment of the Trust
conditions obtaining at any time render such action advisable. The Principal
Underwriter shall have the right to suspend sales at any time, to refuse to
accept or confirm any order from an investor or financial service firm, or to
accept or confirm any such order in part only, if in the judgment of the
Principal Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid (by one or more classes) -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and mailing periodic reports to shareholders (including the expense of
setting up in type any such Registration Statement, Prospectus or periodic
report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(v) the fees, costs and expenses of the registration or
qualification of shares for sale in the various states, territories or other
jurisdictions (including without limitation the registering or qualifying the
Fund as a broker or dealer or any officer of the Fund as agent or salesman in
any state, territory or other jurisdiction); and
(vi) all payments to be made pursuant to any written plan
approved in accordance with Rule 12b-1 under the 1940 Act or any written service
plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plans (the "Plans"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to Class B and Class C shares, to make certain payments as
follows. The Principal Underwriter shall be entitled to be paid by the Fund a
sales commission equal to an amount not exceeding that set forth on Schedule A
hereto of the price received by the Fund for each sale of Class B shares and
6.25% of the price received by the Fund for each sale of Class C shares
(excluding in each case the reinvestment of dividends and distributions), such
payment to be made out of Class B or Class C assets as applicable and in the
manner set forth in this paragraph 5. The Principal Underwriter shall also be
entitled to be paid by the Fund a separate distribution fee (calculated in
accordance with paragraph 5(d)) out of the relevant Class' assets, such payment
to be made in the manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
Each Class B and Class C shall accrue daily an amount calculated at the rate of
.75% per annum of its daily net assets, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter due from the relevant Class.
The amount of such uncovered distribution charges shall be calculated daily. For
purposes of this calculation, distribution charges of the Principal Underwriter
shall include (a) the aggregate of all sales commissions which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph 5(d) of the Prior Agreements) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this paragraph (d) (and pursuant
to paragraph 5(d) of the Prior Agreements) plus all such fees which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) since inception of the Prior
Agreements through and including the day next preceding the date of calculation
and (ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter since inception of the Prior Agreements
through and including the day next preceding the date of calculation. In
addition, the calculation shall include amounts under the Prior Agreements when
a predecessor principal underwriter existed. If the result of such subtraction
is a positive amount, a distribution fee [computed at the rate of 1% per annum
above the prime rate (being the base rate on corporate loans posted by at least
75% of the nation's 30 largest banks) then being reported in the Eastern Edition
of The Wall Street Journal or if such prime rate is not so reported such other
rate as may be designated from time to time by vote or other action of a
majority of (i) those Trustees of the Trust who are not "interested persons" of
the Trust (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Rule
12b-1 Trustees") and (ii) all of the Trustees then in office] shall be computed
on such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter due from a Class with respect to such day for all purposes of this
Agreement. If the result of such subtraction is a negative amount, there shall
exist no outstanding uncovered distribution charges of the Principal Underwriter
due from that Class with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of a Class for
such year. The term "Principal Underwriter" as used in this paragraph (d) shall
include the current Principal Underwriter's predecessor, a Massachusetts
corporation called Eaton Vance Distributors, Inc. that served as principal
underwriter for the Trust prior to November 1, 1996.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges due from a Class of
the Principal Underwriter. Each Class B and Class C shall be entitled to receive
all remaining contingent deferred sales charges paid or payable by its
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from that Class,
provided that no such sales charge which would cause the Fund to exceed the
maximum applicable cap imposed thereon by paragraph (2) of subsection (d) of
Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc. shall be imposed.
(f) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemption of Class A shares.
(g) The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or this Agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trust's Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
(h) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments from the assets of each Class
of service fees to the Principal Underwriter, Authorized Firms and other
persons. The aggregate of such payments during any fiscal year of the Fund shall
not exceed .25% of a class' average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Trust and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares of each Class
repurchased for the account of the Fund since the last previous report, together
with the prices at which such repurchases were made, and upon the request of any
officer or Trustee of the Trust shall furnish similar information with respect
to all repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Trust or for
cancellation by the Trust.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1998 (or, if applicable, the next April 28 which follows the day on which a
Fund has become a Fund hereunder by amendment to Schedule A subsequent to April
28, 1998), and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance after April 28, 1998 (or, if applicable,
said next April 28) is specifically approved at least annually (i) by the vote
of a majority of the Rule 12b-1 Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the Fund;
(b) this Agreement may be terminated with respect to a Class with a
12b-1 plan at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority of the outstanding voting securities of the Class on not more
than sixty (60) days' notice to the Principal Underwriter. The Principal
Underwriter shall be entitled to receive all contingent deferred sales charges
paid or payable from such class with respect to any day subsequent to such
termination;
(c) either party shall have the right to terminate this Agreement with
respect to any Class on six (6) months' written notice thereof given in writing
to the other;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof;
(e) if this Agreement is terminated with respect of any Class or Fund,
it shall not terminate the Agreement with respect to any other Class or Fund;
and
(f) additional series of the Trust will become Funds hereunder upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Trust hereunder
are not to be deemed to be exclusive, the Principal Underwriter being free to
(a) render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Trust and the Trustees of the Trust. The Principal
Underwriter hereby agrees that it shall have recourse only to the assets of the
relevant Fund or Class thereof for payment of claims or obligations as between
the Trust and the Principal Underwriter arising out of this Agreement and shall
not seek satisfaction from any shareholders or from the Trustees. No Fund or
Class shall not be responsible for obligations of any other fund or class of the
Trust.
15. On June 23, 1997, the Trust adopted a Plan of reorganization and a
Multiple Class Plan on behalf of its series and in connection therewith the
Trustees of the Trust amended the Declaration of Trust to terminate certain
series, to rename its Marathon series and to establish four classes of shares
within each renamed series. Pursuant to such reorganization the assets of each
Class I Marathon series will be converted to Class B assets of the renamed
series, the Class I shares of each Marathon series will be converted to Class B
shares of the renamed series, the assets of each Classic series will be
converted to Class C assets of the renamed series, and the shares of each
Classic series will be converted to Class C shares of the renamed series. All
references in this Agreement to the "Prior Agreements" shall mean (i) with
respect to the Class B assets or shares of a particular Fund, all prior
distribution agreements of the Trust applicable to the converted assets and
shares of the relevant Marathon series, and (ii) with respect to the Class C
assets or shares of a particular Fund, all prior distribution agreements of the
Trust applicable to the converted assets and shares of the relevant Classic
series. All references in this Agreement to the "Prior Agreements" shall not be
applicable to any additional series of the Trust which becomes a Fund hereunder
by amendment of Schedule A subsequent to June 23, 1997.
16. This Agreement shall be effective with respect to a specific Class
of shares for a particular Fund on the date that Fund begins offering shares of
that Class. As of such effective date, this Agreement shall be deemed to amend,
replace and be substituted for the Prior Agreements previously applicable to the
relevant Class assets of that Fund. The outstanding uncovered distribution
charges of the Principal Underwriter with respect to a specific Class calculated
under the Prior Agreements as of the close of business on the date a Fund begins
offering shares of that Class shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class calculated under
this Agreement as of the opening of business on the date such shares are
offered.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 23rd day June, 1997.
EATON VANCE INVESTMENT TRUST
By /s/ Thomas J. Fetter
---------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ Alan R. Dynner
---------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE INVESTMENT TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Sales
Commissions on
Name of Fund Adopting this Agreement Class B Shares Prior Agreements Relating to Class B Assets
------------------------------------ -------------- -------------------------------------------
<S> <C> <C>
Eaton Vance California Limited Maturity Municipals Fund 3.0% May 22, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Connecticut Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Florida Limited Maturity Municipals Fund* 3.0% May 22, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Massachusetts Limited Maturity Municipals Fund* 3.0% May 26, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Michigan Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/June 19, 1995/
November 1, 1996
Eaton Vance National Limited Maturity Municipals Fund* 3.0% May 18, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance New Jersey Limited Maturity Municipals Fund 3.0% May 26, 1992/ July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance New York Limited Maturity Municipals Fund* 3.0% May 22, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Ohio Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/June 19, 1995/
November 1, 1996
Eaton Vance Pennsylvania Limited Maturity Municipals Fund* 3.0% May 26, 1992/July 7, 1993/June 19, 1995/
November 1, 1996
- ------------------------
* The Prior Agreements relating to these Funds' Class C assets are dated November 29, 1993, January 27, 1995 and November 1, 1996.
</TABLE>
<PAGE>
Exhibit 9(b)
EATON VANCE INVESTMENT TRUST
ADMINISTRATIVE SERVICES AGREEMENT
dated June 19, 1995
June 23, 1997
Amendment to Schedule A
Effective with the fiscal year end of each respective Fund which is a series of
Eaton Vance Investment Trust (March 31, 1998), all Traditional and Classic Funds
will become Class A and Class C, respectively of the existing Marathon version
of the corresponding Funds and the current Marathon Fund will change its name to
that indicated on Schedule A hereto. Marathon shares will become Class B shares
of the renamed Fund.
A revised Schedule A reflecting the above is attached.
<PAGE>
SCHEDULE A
Effective April 1, 1998
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Pennsylvania Limited Maturity Municipals Fund
<PAGE>
Exhibit 10
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Telephone: (617) 482-8260
Telecopy: (617) 338-8054
March 23, 1998
Eaton Vance Investment Trust
24 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
Eaton Vance Investment Trust (the "Trust") is a voluntary association
(commonly referred to as a "business trust") established under Massachusetts law
with the powers and authority set forth under its Declaration of Trust dated
October 23, 1985, as amended (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 Trustees may authorize one or more
series or classes of shares, without par value, and the number of shares of each
series or class authorized is unlimited. The series and classes of shares
established and designated as of the date hereof are identified on Appendix A
hereto.
Under the Declaration of Trust, the Trustees may from time to time
issue and sell or cause to be issued and sold shares of the Trust for cash or
for property. All such shares, when so issued, shall be fully paid and
nonassessable by the Trust.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as we have
deemed necessary or appropriate for the purpose of this opinion.
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 of the Trust registered by Form N-1A
may be legally and validly issued in accordance with the Declaration of Trust
upon receipt 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 have acted as internal legal
counsel to the Trust in connection with the registration of shares.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Post-Effective Amendment No. 39 to the
Trust's Registration Statement on Form N-1A pursuant to the Securities Act of
1933, as amended.
Very truly yours,
/s/ Maureen A. Gemma
--------------------------
Maureen A. Gemma, Esq.
Vice President
<PAGE>
Appendix A
Established and Designated Series* of the Trust
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance
Connecticut Limited Maturity Municipals Fund Eaton Vance Florida
Limited Maturity Municipals Fund Eaton Vance Massachusetts Limited
Maturity Municipals Fund Eaton Vance Michigan Limited Maturity
Municipals Fund Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund Eaton Vance New
York Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity
Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals
Fund
- ---------------
* Each Series is authorized to issue Class A, Class B, Class C and Class I
shares.
<PAGE>
EXHIBIT 11(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 39 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of Eaton Vance California Limited Maturity Municipals Fund,
Eaton Vance Connecticut Limited Maturity Municipals Fund, Eaton Vance Florida
Limited Maturity Municipals Fund, Eaton Vance Massachusetts Limited Maturity
Municipals Fund, Eaton Vance Michigan Limited Maturity Municipals Fund, Eaton
Vance New Jersey Limited Maturity Municipals Fund, Eaton Vance New York Limited
Maturity Municipals Fund, Eaton Vance Ohio Limited Maturity Municipals Fund and
Eaton Vance Pennsylvania Limited Maturity Municipals Fund of our report dated
May 2, 1997, relating to Eaton Vance California Limited Maturity Municipals
Fund, Eaton Vance Connecticut Limited Maturity Municipals Fund, Eaton Vance
Florida Limited Maturity Municipals Fund, Eaton Vance Massachusetts Limited
Maturity Municipals Fund, Eaton Vance Michigan Limited Maturity Municipals Fund,
Eaton Vance New Jersey Limited Maturity Municipals Fund, Eaton Vance New York
Limited Maturity Municipals Fund, Eaton Vance Ohio Limited Maturity Municipals
Fund and Eaton Vance Pennsylvania Limited Maturity Municipals Fund (formerly 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
"Independent Certified Public Accountants" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
March 23, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 39 to the
Registration Statement (1933 Act File No. 33-1121) of Eaton Vance Investment
Trust on behalf of Eaton Vance National Limited Maturity Municipals Fund of our
report dated May 2, 1997, relating to Eaton Vance National Limited Maturity
Municipals Fund (formerly 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
"Independent Certified Public Accountants" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
March 23, 1998
Boston, Massachusetts
<PAGE>
Exhibit 15(a)
EATON VANCE INVESTMENT TRUST
CLASS A SERVICE PLAN
WHEREAS, Eaton Vance Investment Trust (the "Trust") engages in business
as an open-end management investment company with multiple series (each with
multiple classes), and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate certain series
(including its Traditional series), and to establish four classes of shares
(including Class A shares) within each renamed series;
WHEREAS, the assets of each terminated Traditional series will be
converted to Class A assets of the renamed series and the shares of each
Traditional series will be converted to Class A shares of the renamed series
pursuant to such reorganization;
WHEREAS, the Trust on behalf of each of its series listed on Schedule A
(a "Fund") desires to adopt a Service Plan with respect to each Fund's Class A
shares pursuant to which each Fund intends to pay service fees out of Class A
assets as contemplated in subsections (b) and (d) of Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class A shares of each Fund;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Service Plan will benefit the Trust,
each Fund listed on Schedule A and the holders of Class A shares of each such
Fund.
NOW, THEREFORE, the Trust hereby adopts this Service Plan (the "Plan")
on behalf of each Fund with Class A shares containing the following terms and
conditions:
1. The Fund may make payments of service fees out of Class A assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of
average daily net assets of Class A for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class to exceed the applicable maximum cap imposed
thereon by subsection (d)(5) of Rule 2830 of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 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.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect with respect to each Class A for
so long as such continuance is specifically approved at least annually in the
manner provided for Trustee approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Plan or any related agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trustees of the Trust and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
6. This Plan may be terminated as to any Fund with respect to its Class
A shares at any time by vote of a majority of the Rule 12b-1 Trustees, or by
vote of a majority of the outstanding Class A voting securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Class A shares of the Fund as provided in Section 1 unless such
amendment, if required by law, is approved by a vote of at least a majority of
the Class A outstanding voting securities of the Fund. In addition, all material
amendments to this Plan shall be approved in the manner provided for in Section
2. Additional series of the Trust which are to become a Fund hereunder will
become subject to this Plan and governed hereby upon approval by the Trustees of
the Trust and amendment of Schedule A.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 5, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class A shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class A shares and no person shall seek
satisfaction thereof from the shareholders of the Fund or officers or Trustees
of the Trust or any other class or series of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class A voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class A shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class A shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class A shares of
the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
13. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class A shares. As of such effective date
this Plan shall amend, replace and be substituted for any service plan
previously applicable to the Class A assets of such Fund.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE INVESTMENT TRUST
CLASS A SERVICE PLAN
EFFECTIVE: JUNE 23, 1997
Name of Fund Adopting this Plan
Eaton Vance California Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund
Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Ohio Limited Maturity Municipals Fund
<PAGE>
Exhibit 15(b)
EATON VANCE INVESTMENT TRUST
CLASS B DISTRIBUTION PLAN
WHEREAS, Eaton Vance Investment Trust (the "Trust") engages in business
as an open-end investment company with multiple series (each with multiple
classes) and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees of the Trust amended the Declaration of Trust to terminate certain
series, to rename its Marathon series and to establish four classes of shares
(including Class B shares) within each renamed series;
WHEREAS, the assets of each Class I Marathon series will be converted
to Class B assets of the renamed series and the Class I shares of each Marathon
series will be converted to Class B shares of the renamed series pursuant to
such reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Marathon
series which are the predecessors to its Class B shares pursuant to which each
Marathon series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class B shares of each of its
series listed on Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class B Distribution Plan unless and until the
Principal Underwriter sells Class B shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class B assets only in connection with the sale of
Class B shares;
WHEREAS, each Fund intends to pay service fees out of Class B assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class B Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class B Distribution Plan will
benefit the Trust, each Fund listed on Schedule A, and the holders of Class B
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class B Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class B assets to the Principal Underwriter only after and as a result of the
sale of Class B shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class B shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class B shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class B assets in an amount not exceeding that set forth on
Schedule A hereto of the price received by the Fund therefor, such payment to be
made in the manner set forth and subject to the terms of this Plan. The amount
of the sales commission shall be established from time to time by vote or other
action of a majority of (i) those Trustees of the Trust who are not "interested
persons" (as defined in the Act) of the Trust and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in office. The
Fund shall also pay the Principal Underwriter out of Class B assets a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class B shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class B shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
B for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares. Class B shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class B
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class B
shares, provided that no such sales charge which would cause the Class B to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class B assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class B for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class B to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 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.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class B
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class B shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class B voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class B shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class B shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class B shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class B shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class B voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class B shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class B shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class B shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class B shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class B assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering Class B shares shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class B calculated
under this Plan as of the opening of business on the date such shares are
offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE INVESTMENT TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Sales
Name of Fund Commission Date of Original Plans (Inception Date)
------------ ---------- ---------------------------------------
<S> <C> <C>
Eaton Vance California Limited Maturity Municipals Fund 3.0% May 22, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance Connecticut Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/
June 19, 1995 (June 20, 1995)
Eaton Vance Florida Limited Maturity Municipals Fund 3.0% May 22, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance Massachusetts Limited Maturity Municipals Fund 3.0% May 26, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance Michigan Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/
June 19, 1995 (June 20, 1995)
Eaton Vance National Limited Maturity Municipals Fund 3.0% May 18, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance New Jersey Limited Maturity Municipals Fund 3.0% May 26, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance New York Limited Maturity Municipals Fund 3.0% May 22, 1992/March 18, 1994/
June 19, 1995 (June 20, 1995)
Eaton Vance Ohio Limited Maturity Municipals Fund 3.5% April 9, 1993/June 14, 1993/
June 19, 1995 (June 20, 1995)
Eaton Vance Pennsylvania Limited Maturity Municipals Fund 3.0% May 26, 1992/March 1, 1994/
June 19, 1995 (June 20, 1995)
Note: All of the foregoing Funds except Eaton Vance Connecticut Limited Maturity Municipals Fund, Eaton Vance
Michigan Limited Maturity Municipals Fund and Eaton Vance Ohio Limited Maturity Municipals Fund adopted an
Amended Distribution Plan on July 7, 1993.
</TABLE>
<PAGE>
Exhibit 15(c)
EATON VANCE INVESTMENT TRUST
CLASS C DISTRIBUTION PLAN
WHEREAS, Eaton Vance Investment Trust (the "Trust") engages in business
as an open-end investment company with multiple series (each with multiple
classes) and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate certain series
(including its Classic series), and to establish four classes of shares
(including Class C shares) within each renamed series;
WHEREAS, the assets of each terminated Classic series will be converted
to Class C assets of the renamed series and the shares of each Classic series
will be converted to Class C shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Classic
series which are the predecessors to its Class C shares pursuant to which each
Classic series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class C shares of each of its
series listed in Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class C Distribution Plan unless and until the
Principal Underwriter sells Class C shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class C assets only in connection with the sale of
Class C shares;
WHEREAS, each Fund intends to pay service fees out of Class C assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class C Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class C Distribution Plan will
benefit the Trust, each Fund listed on Schedule A and the holders of Class C
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class C Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class C assets to the Principal Underwriter only after and as a result of the
sale of Class C shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class C shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class C shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class C assets in an amount not exceeding 6.25% of the price
received by the Fund therefor, such payment to be made in the manner set forth
and subject to the terms of this Plan. The amount of the sales commission shall
be established from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" (as defined in the
Act) of the Trust and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office. The Fund shall also pay
the Principal Underwriter out of Class C assets a separate distribution fee
(calculated in accordance with Section 3), such payment to be made in the manner
set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class C shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class C shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
C for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares. Class C shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class C
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class C
shares, provided that no such sales charge which would cause the Class C to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class C assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class C for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class C to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 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.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class C
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class C shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class C voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class C shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class C shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class C shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class C shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class C voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class C shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class C shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class C shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class C shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class C assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering its Class C shares shall be the outstanding uncovered
distribution charges of the Principal Underwriter with respect to such Class C
calculated under this Plan as of the opening of business on the date such shares
are offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE INVESTMENT TRUST
CLASS C DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Name of Fund Adopting this Plan Date of Original Plan (Inception Date)
- ------------------------------- --------------------------------------
<S> <C>
Eaton Vance Florida Limited Maturity Municipals Fund November 29, 1993/January 27, 1995 (January 30, 1995)
Eaton Vance Massachusetts Limited Maturity Municipals Fund November 29, 1993/January 27, 1995 (January 30, 1995)
Eaton Vance National Limited Maturity Municipals Fund November 29, 1993/January 27, 1995 (January 30, 1995)
Eaton Vance New York Limited Maturity Municipals Fund November 29, 1993/January 27, 1995 (January 30, 1995)
Eaton Vance Pennsylvania Limited Maturity Municipals Fund November 29, 1993/January 27, 1995 (January 30, 1995)
</TABLE>
<PAGE>
Exhibit 16
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,273.11 $1,273.11 27.31% 4.63% 27.31% 4.63%
5 YEARS ENDED
09/30/97 09/30/92 $1,240.20 $1,240.20 24.02% 4.40% 24.02% 4.40%
1 YEAR ENDED
09/30/97 09/30/96 $1,045.46 $1,035.46 4.55% 4.55% 3.55% 3.55%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $1,281.72 $1,281.72 28.17% 4.77% 28.17% 4.77%
5 YEARS ENDED
09/30/97 09/30/92 $1,254.32 $1,254.32 25.43% 4.64% 25.43% 4.64%
1 YEAR ENDED
09/30/97 09/30/96 $1,055.59 $1,045.59 5.56% 5.56% 4.56% 4.56%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,297.88 $1,297.88 29.79% 5.00% 29.79% 5.00%
5 YEARS ENDED
09/30/97 09/30/92 $1,263.42 $1,263.42 26.34% 4.79% 26.34% 4.79%
1 YEAR ENDED
09/30/97 09/30/96 $1,066.70 $1,056.70 6.67% 6.67% 5.67% 5.67%
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 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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $1,312.27 $1,312.27 31.23% 5.23% 31.23% 5.23%
5 YEARS ENDED
09/30/97 09/30/92 $1,266.57 $1,266.57 26.66% 4.84% 26.66% 4.84%
1 YEAR ENDED
09/30/97 09/30/96 $1,067.49 $1,057.49 6.75% 6.75% 5.75% 5.75%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,287.88 $1,287.88 28.79% 4.85% 28.79% 4.85%
5 YEARS ENDED
09/30/97 09/30/92 $1,252.84 $1,252.84 25.28% 4.61% 25.28% 4.61%
1 YEAR ENDED
09/30/97 09/30/96 $1,060.60 $1,030.60 6.06% 6.06% 3.06% 3.06%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on 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 9/30/97:
Interest Income Earned: $66,276
Plus Dividend Income Earned:
------
Equal Gross Income: $66,276
Minus Expenses: $21,661
------
Equal Net Investment Income: $44,615
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 1,575,594
---------
Equal Net Investment Income Earned Per Share: $0.0283
Net Asset Value Per Share 9/30/97: $10.24
30 Day Yield*: 3.34%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 4.84%
Divided by one minus a tax rate of 37.42%: 0.6258
------
Equal Tax Equivalent Yield***: 5.34%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0283/$10.24)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and California tax rate of 37.42%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $1,192.32 $1,192.32 19.23% 4.02% 19.23% 4.02%
1 YEAR ENDED
09/30/97 09/30/96 $1,058.94 $1,028.94 5.89% 5.89% 2.89% 2.89%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $26,199
Plus Dividend Income Earned:
------
Equal Gross Income: $26,199
Minus Expenses: $9,508
------
Equal Net Investment Income: $16,691
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 622,765
------
Equal Net Investment Income Earned Per Share: $0.0268
Net Asset Value Per Share 9/30/97: $10.02
30 Day Yield*: 3.23%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 4.68%
Divided by one minus a tax rate of 34.11%: 0.6589
------
Equal Tax Equivalent Yield***: 4.90%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0268/$10.02)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Connecticut tax rate of 34.11%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,278.49 $1,278.49 27.85% 4.71% 27.85% 4.71%
5 YEARS ENDED
09/30/97 09/30/92 $1,245.45 $1,245.45 24.54% 4.49% 24.54% 4.49%
1 YEAR ENDED
09/30/97 09/30/96 $1,046.45 $1,016.45 4.64% 4.64% 1.64% 1.64%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $115,655
Plus Dividend Income Earned:
--------
Equal Gross Income: $115,655
Minus Expenses: $39,155
--------
Equal Net Investment Income: $76,500
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 2,758,104
---------
Equal Net Investment Income Earned Per Share: $0.0277
Net Asset Value Per Share 9/30/97: $10.18
30 Day Yield*: 3.29%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 5.14%
Divided by one minus a tax rate of 39.89%: 0.6011
------
Equal Tax Equivalent Yield***: 5.47%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0277/$10.18)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Florida tax rate of 39.89%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $1,285.09 $1,285.09 28.51% 4.82% 28.51% 4.82%
5 YEARS ENDED
09/30/97 09/30/92 $1,257.60 $1,257.60 25.76% 4.69% 25.76% 4.69%
1 YEAR ENDED
09/30/97 09/30/96 $1,056.90 $1,026.90 5.69% 5.69% 2.69% 2.69%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $94,143
Plus Dividend Income Earned:
-------
Equal Gross Income: $94,143
Minus Expenses: $29,973
-------
Equal Net Investment Income: $64,170
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 2,207,879
---------
Equal Net Investment Income Earned Per Share: $0.0291
Net Asset Value Per Share 9/30/97: $10.23
30 Day Yield*: 3.44%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 4.99%
Divided by one minus a tax rate of 39.28%: 0.6072
------
Equal Tax Equivalent Yield***: 5.67%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0291/$10.23)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Massachusetts tax rate of 39.28%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $1,189.78 $1,189.78 18.98% 3.97% 18.98% 3.97%
1 YEAR ENDED
09/30/97 09/30/96 $1,063.30 $1,033.30 6.33% 6.33% 3.33% 3.33%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $23,737
Plus Dividend Income Earned:
-------
Equal Gross Income: $23,737
Minus Expenses: $4,825
-------
Equal Net Investment Income: $18,912
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 554,447
-------
Equal Net Investment Income Earned Per Share: $0.0341
Net Asset Value Per Share 9/30/97: $9.94
30 Day Yield*: 4.15%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.01%
Divided by one minus a tax rate of 35.33%: 0.6467
------
Equal Tax Equivalent Yield***: 6.42%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0341/$9.94)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Michigan tax rate of 35.33%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $1,290.36 $1,290.36 29.04% 4.90% 29.04% 4.90%
5 YEARS ENDED
09/30/97 09/30/92 $1,254.19 $1,254.19 25.42% 4.63% 25.42% 4.63%
1 YEAR ENDED
09/30/97 09/30/96 $1,059.41 $1,029.41 5.94% 5.94% 2.94% 2.94%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $86,139
Plus Dividend Income Earned:
-------
Equal Gross Income: $86,139
Minus Expenses: $27,982
-------
Equal Net Investment Income: $58,157
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 2,040,444
---------
Equal Net Investment Income Earned Per Share: $0.0285
Net Asset Value Per Share 9/30/97: $10.29
30 Day Yield*: 3.35%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 4.86%
Divided by one minus a tax rate of 35.40%: 0.6460
------
Equal Tax Equivalent Yield***: 5.19%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0285/$10.29)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and New Jersey tax rate of 35.40%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $1,304.17 $1,304.17 30.42% 5.10% 30.42% 5.10%
5 YEARS ENDED
09/30/97 09/30/92 $1,269.41 $1,269.41 26.94% 4.89% 26.94% 4.89%
1 YEAR ENDED
09/30/97 09/30/96 $1,069.38 $1,039.38 6.94% 6.94% 3.94% 3.94%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $144,137
Plus Dividend Income Earned:
--------
Equal Gross Income: $144,137
Minus Expenses: $43,325
--------
Equal Net Investment Income: $100,812
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 3,301,331
---------
Equal Net Investment Income Earned Per Share: $0.0305
Net Asset Value Per Share 9/30/97: $10.40
30 Day Yield*: 3.55%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.14%
Divided by one minus a tax rate of 38.80%: 0.6120
------
Equal Tax Equivalent Yield***: 5.80%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0305/$10.40)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and New York tax rate of 38.80%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $1,208.03 $1,208.03 20.80% 4.33% 20.80% 4.33%
1 YEAR ENDED
09/30/97 09/30/96 $1,063.96 $1,033.96 6.40% 6.40% 3.40% 3.40%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $63,555
Plus Dividend Income Earned:
-------
Equal Gross Income: $63,555
Minus Expenses: $20,844
-------
Equal Net Investment Income: $42,711
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 1,442,458
---------
Equal Net Investment Income Earned Per Share: $0.0296
Net Asset Value Per Share 9/30/97: $10.08
30 Day Yield*: 3.55%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.14%
Divided by one minus a tax rate of 35.76%: 0.6424
------
Equal Tax Equivalent Yield***: 5.53%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0296/$10.08)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Ohio tax rate of 35.76%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $1,311.70 $1,311.70 31.17% 5.22% 31.17% 5.22%
5 YEARS ENDED
09/30/97 09/30/92 $1,266.05 $1,266.05 26.60% 4.83% 26.60% 4.83%
1 YEAR ENDED
09/30/97 09/30/96 $1,068.51 $1,038.51 6.85% 6.85% 3.85% 3.85%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $85,354
Plus Dividend Income Earned:
-------
Equal Gross Income: $85,354
Minus Expenses: $27,246
-------
Equal Net Investment Income: $58,108
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 1,988,585
---------
Equal Net Investment Income Earned Per Share: $0.0292
Net Asset Value Per Share 9/30/97: $10.42
30 Day Yield*: 3.39%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 5.30%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0292/$10.42)+1)-1]
** Assuming a tax rate of 36%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $977.44 $1,279.30 30.88% 5.17% 27.93% 4.72%
5 YEARS ENDED
09/30/97 09/30/92 $977.01 $1,243.92 27.32% 4.95% 24.39% 4.46%
1 YEAR ENDED
09/30/97 09/30/96 $977.62 $1,043.06 6.69% 6.69% 4.31% 4.31%
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 MARATHON CALIFORNIA LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $82,153
Plus Dividend Income Earned:
-------
Equal Gross Income: $82,153
Minus Expenses: $14,707
-------
Equal Net Investment Income: $67,446
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 1,952,847
---------
Equal Net Investment Income Earned Per Share: $0.0345
Net Asset Value Per Share 9/30/97: $10.24
30 Day Yield*: 4.08%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.91%
Divided by one minus a tax rate of 37.42%: 0.6258
------
Equal Tax Equivalent Yield***: 6.52%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0345/$10.24)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and California tax rate of 37.42%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $977.43 $1,162.34 18.92% 3.96% 16.23% 3.43%
1 YEAR ENDED
09/30/97 09/30/96 $977.55 $1,038.45 6.23% 6.23% 3.84% 3.84%
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 MARATHON CONNECTICUT LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $13,403
Plus Dividend Income Earned:
-------
Equal Gross Income: $13,403
Minus Expenses: $2,444
-------
Equal Net Investment Income: $10,959
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 319,013
-------
Equal Net Investment Income Earned Per Share: $0.0344
Net Asset Value Per Share 9/30/97: $10.02
30 Day Yield*: 4.15%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.01%
Divided by one minus a tax rate of 34.11%: 0.6589
------
Equal Tax Equivalent Yield***: 6.30%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0344/$10.02)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Connecticut tax rate of 34.11%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $977.42 $1,279.09 30.87% 5.17% 27.91% 4.72%
5 YEARS ENDED
09/30/97 09/30/92 $977.59 $1,246.28 27.49% 4.98% 24.63% 4.50%
1 YEAR ENDED
09/30/97 09/30/96 $977.70 $1,032.19 5.58% 5.58% 3.22% 3.22%
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 MARATHON FLORIDA LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $185,163
Plus Dividend Income Earned:
--------
Equal Gross Income: $185,163
Minus Expenses: $35,609
--------
Equal Net Investment Income: $149,554
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 4,414,517
---------
Equal Net Investment Income Earned Per Share: $0.0339
Net Asset Value Per Share 9/30/97: $10.18
30 Day Yield*: 4.03%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 6.30%
Divided by one minus a tax rate of 39.18%: 0.6082
------
Equal Tax Equivalent Yield***: 6.63%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0339/$10.18)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Florida tax rate of 39.18%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND - CLASS A SHARES
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $977.52 $1,256.20 28.51% 4.82% 25.62% 4.37%
5 YEARS ENDED
09/30/97 09/30/92 $977.67 $1,229.52 25.76% 4.69% 22.95% 4.22%
1 YEAR ENDED
09/30/97 09/30/96 $977.62 $1,033.25 5.69% 5.69% 3.33% 3.33%
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
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 MARATHON MASSACHUSETTS LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $150,678
Plus Dividend Income Earned:
--------
Equal Gross Income: $150,678
Minus Expenses: $25,887
--------
Equal Net Investment Income: $124,791
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 3,530,350
---------
Equal Net Investment Income Earned Per Share: $0.0353
Net Asset Value Per Share 9/30/97: $10.23
30 Day Yield*: 4.18%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.06%
Divided by one minus a tax rate of 39.28%: 0.6072
------
Equal Tax Equivalent Yield***: 6.88%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0353/$10.23)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Massachusetts tax rate of 39.28%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $977.40 $1,170.15 19.72% 4.12% 17.02% 3.59%
1 YEAR ENDED
09/30/97 09/30/96 $977.53 $1,046.22 7.03% 7.03% 4.62% 4.62%
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 MARATHON MICHIGAN LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $28,036
Plus Dividend Income Earned:
-------
Equal Gross Income: $28,036
Minus Expenses: $9,702
-------
Equal Net Investment Income: $18,334
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 655,050
-------
Equal Net Investment Income Earned Per Share: $0.0280
Net Asset Value Per Share 9/30/97: $9.94
30 Day Yield*: 3.40%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 4.93%
Divided by one minus a tax rate of 35.33%: 0.6467
------
Equal Tax Equivalent Yield***: 5.26%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.028/$9.94)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Michigan tax rate of 35.33%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $977.03 $1,270.67 30.05% 5.05% 27.07% 4.60%
5 YEARS ENDED
09/30/97 09/30/92 $977.63 $1,235.81 26.41% 4.80% 23.58% 4.33%
1 YEAR ENDED
09/30/97 09/30/96 $977.71 $1,040.22 6.40% 6.40% 4.02% 4.02%
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
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 MARATHON NEW JERSEY LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $121,552
Plus Dividend Income Earned:
--------
Equal Gross Income: $121,552
Minus Expenses: $21,571
--------
Equal Net Investment Income: $99,981
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 2,876,611
---------
Equal Net Investment Income Earned Per Share: $0.0348
Net Asset Value Per Share 9/30/97: $10.30
30 Day Yield*: 4.09%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 5.93%
Divided by one minus a tax rate of 35.40%: 0.6460
------
Equal Tax Equivalent Yield***: 6.33%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0348/$10.30)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and New Jersey tax rate of 35.40%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/29/92 $977.44 $1,313.28 34.36% 5.69% 31.33% 5.24%
5 YEARS ENDED
09/30/97 09/30/92 $977.66 $1,278.57 30.78% 5.51% 27.86% 5.04%
1 YEAR ENDED
09/30/97 09/30/96 $977.89 $1,051.06 7.48% 7.48% 5.11% 5.11%
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 MARATHON NEW YORK LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $212,931
Plus Dividend Income Earned:
--------
Equal Gross Income: $212,931
Minus Expenses: $33,744
--------
Equal Net Investment Income: $179,187
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 4,875,672
---------
Equal Net Investment Income Earned Per Share: $0.0368
Net Asset Value Per Share 9/30/97: $10.40
30 Day Yield*: 4.28%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.20%
Divided by one minus a tax rate of 38.80%: 0.6120
------
Equal Tax Equivalent Yield***: 6.99%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0368/$10.40)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and New York tax rate of 38.80%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 year period ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 04/16/93 $977.54 $1,182.75 20.99% 4.36% 18.28% 3.83%
1 YEAR ENDED
09/30/97 09/30/96 $977.69 $1,042.43 6.62% 6.62% 4.24% 4.24%
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 MARATHON OHIO LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $43,611
Plus Dividend Income Earned:
-------
Equal Gross Income: $43,611
Minus Expenses: $8,517
-------
Equal Net Investment Income: $35,094
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 989,895
-------
Equal Net Investment Income Earned Per Share: $0.0355
Net Asset Value Per Share 9/30/97: $10.08
30 Day Yield*: 4.26%
Divided One minus the Tax Rate of 31%: 0.69
------
Equal Tax Equivalent Yield **: 6.17%
Divided by one minus a tax rate of 35.76%: 0.6424
------
Equal Tax Equivalent Yield***: 6.63%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0355/$10.08)+1)-1]
** Assuming a tax rate of 31%
Assuming a federal and Ohio tax rate of 35.76%
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND - CLASS A SHARES
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 06/01/92 $977.52 $1,282.21 31.17% 5.22% 28.22% 4.77%
5 YEARS ENDED
09/30/97 09/30/92 $977.04 $1,236.98 26.60% 4.83% 23.70% 4.35%
1 YEAR ENDED
09/30/97 09/30/96 $977.82 $1,044.81 6.85% 6.85% 4.48% 4.48%
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 MARATHON PENNSYLVANIA LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $147,316
Plus Dividend Income Earned:
--------
Equal Gross Income: $147,316
Minus Expenses: $25,338
--------
Equal Net Investment Income: $121,978
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 3,431,321
---------
Equal Net Investment Income Earned Per Share: $0.0355
Net Asset Value Per Share 9/30/97: $10.43
30 Day Yield*: 4.12%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 6.44%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0355/$10.43)+1)-1]
** Assuming a tax rate of 36%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/22/92 $1,302.65 $1,302.65 30.26% 5.06% 30.26% 5.06%
5 YEARS ENDED
09/30/97 09/30/92 $1,253.63 $1,253.63 25.36% 4.62% 25.36% 4.62%
1 YEAR ENDED
09/30/97 09/30/96 $1,060.59 $1,050.59 6.06% 6.06% 5.06% 5.06%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 09/30/97 ON 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/22/92 $1,316.23 $1,316.23 31.62% 5.26% 31.62% 5.26%
5 YEARS ENDED
09/30/97 09/30/92 $1,266.67 $1,266.67 26.67% 4.84% 26.67% 4.84%
1 YEAR ENDED
09/30/97 09/30/96 $1,065.66 $1,035.66 6.57% 6.57% 3.57% 3.57%
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 on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND - CLASS I
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $146,151
Plus Dividend Income Earned:
--------
Equal Gross Income: $146,151
Minus Expenses: $41,531
--------
Equal Net Investment Income: $104,620
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 2,972,959
---------
Equal Net Investment Income Earned Per Share: $0.0352
Net Asset Value Per Share 9/30/97: $10.34
30 Day Yield*: 4.12%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 6.44%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0352/$10.34)+1)-1]
** Assuming a tax rate of 36%
<PAGE>
<TABLE>
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 September 30, 1997 and for the 1 and 5 year periods ended
September 30, 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.
<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 09/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/22/92 $977.56 $1,319.06 34.93% 5.75% 31.91% 5.30%
5 YEARS ENDED
09/30/97 09/30/92 $977.52 $1,269.41 29.86% 5.36% 26.94% 4.89%
1 YEAR ENDED
09/30/97 09/30/96 $977.30 $1,048.85 7.32% 7.32% 4.88% 4.88%
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 MARATHON NATIONAL LIMITED MATURITY MUNICIPALS FUND - CLASS II
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 9/30/97:
Interest Income Earned: $228,395
Plus Dividend Income Earned:
--------
Equal Gross Income: $228,395
Minus Expenses: $37,375
--------
Equal Net Investment Income: $191,020
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 4,648,370
---------
Equal Net Investment Income Earned Per Share: $0.0411
Net Asset Value Per Share 9/30/97: $10.34
30 Day Yield*: 4.82%
Divided One minus the Tax Rate of 36%: 0.64
------
Equal Tax Equivalent Yield **: 7.53%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0411/$10.34)+1)-1]
** Assuming a tax rate of 36%
<PAGE>
EXHIBIT 18
MULTIPLE CLASS PLAN FOR EATON VANCE FUNDS
Dated June 23, 1997
WHEREAS, each trust (each a "Trust") listed on Schedule A engages in
business as an open-end investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees (hereafter the "Trustees") of each Trust have
established four classes of shares of the series of the Trust (each a "Fund")
which series are listed on Schedule A hereto, such classes having been
designated Class A, Class B, Class C and Class I (the "Classes");
WHEREAS, each Fundis established in accordance with Section 18(f)(2)
of the Act, its shares are registered on Form N-1A under the Securities Act of
1933, and it is entitled to have a multiple class plan adopted on its behalf by
the Trust pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, each Trust hereby adopts this Multiple Class Plan (the
"Plan") on behalf of each Fund in accordance with Rule 18f-3 under the Act and
containing the following terms and conditions:
1. Pursuant to each Fund's contractual arrangements and various actions
taken by the Trustees and as described in the Fund's prospectuses, each Class of
shares is subject to different distribution arrangements and accordingly is
subject to different expenses related thereto, including distribution fees and
shareholder service expenses. Class A shares are offered subject to an initial
sales charge and are subject to service fee payments in amounts not exceeding
.25% of the average daily net assets attributable to such Class for each fiscal
year. Class B shares are offered subject to a declining contingent deferred
sales charge, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class C shares are
offered subject to a 1% contingent deferred sales charge for redemption within
the first year, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class I shares are
offered at net asset value to certain investors and are not subject to
distribution or service fee payments. These fees and sales charges may change
over time. As described in the Fund's prospectuses, the sales charges described
above may be reduced or waived under certain circumstances.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration, notice or filing fees of the Securities and Exchange Commission
and state securities agencies, (d) the expense of administrative personnel and
services required to support the shareholders of a Class, (e) Trustees' fees or
expenses incurred as a result of issues or matters relating to a Class, and (f)
legal, auditing and accounting expenses relating to a Class. Such expense
allocation is subject to the continuing availability of a revenue procedure of
the Internal Revenue Service to the effect that the payments made under a Fund's
contractual arrangements and other Class specific expenses with respect to a
Class of shares do not result in such Fund's dividends or distributions
constituting "preferential dividends" under the Internal Revenue Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. For shares purchased prior to April 26, 1996, Class I shares of an
EV Marathon series of Eaton Vance Investment Trust (to be renamed "Class B
shares") shall automatically convert to Class II shares of such series (to be
renamed "Class A shares") on the fourth anniversary on which Class I shares were
purchased. For shares purchased thereafter, such 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 will automatically convert to such
Class II shares. Such conversion will occur during the month following the
expiration of the holding period. Such conversion shall be effected on the basis
of the relative net asset values per share of the two Classes without the
imposition of any sales load, fee or other charge. For purposes of this
conversion, all distributions paid on such 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 such 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 such Class II shares. This portion will be
determined by the ratio that such Class I shares being converted bear to the
total of Class I shares (excluding shares acquired through reinvestment) in the
account.
5. Each Class of shares may be exchanged for shares of the same type of
other funds in the Eaton Vance family of funds, which may change from time to
time, subject to terms, conditions and limitations set forth in the relevant
prospectuses.
6. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of a Trust.
7. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
<PAGE>
<TABLE>
<CAPTION>
Schedule A
Eaton Vance Growth Trust
<S> <C>
Eaton Vance Asian Small Companies Fund Eaton Vance Information Age Fund
Eaton Vance Greater China Growth Fund Eaton Vance Worldwide Developing Resources Fund
Eaton Vance Growth Fund Eaton Vance Worldwide Health Sciences Fund
Eaton Vance Investment Trust
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals Fund
Eaton Vance Municipals Trust
Eaton Vance Alabama Municipals Fund Eaton Vance Missouri Municipals Fund
Eaton Vance Arizona Municipals Fund Eaton Vance National Municipals Fund
Eaton Vance Arkansas Municipals Fund Eaton Vance New Jersey Municipals Fund
Eaton Vance California Municipals Fund Eaton Vance New York Municipals Fund
Eaton Vance Colorado Municipals Fund Eaton Vance North Carolina Municipals Fund
Eaton Vance Connecticut Municipals Fund Eaton Vance Ohio Municipals Fund
Eaton Vance Florida Municipals Fund Eaton Vance Oregon Municipals Fund
Eaton Vance Georgia Municipals Fund Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Kentucky Municipals Fund Eaton Vance Rhode Island Municipals Fund
Eaton Vance Louisiana Municipals Fund Eaton Vance South Carolina Municipals Fund
Eaton Vance Maryland Municipals Fund Eaton Vance Tennessee Municipals Fund
Eaton Vance Massachusetts Municipals Fund Eaton Vance Texas Municipals Fund
Eaton Vance Michigan Municipals Fund Eaton Vance Virginia Municipals Fund
Eaton Vance Minnesota Municipals Fund Eaton Vance West Virginia Municipals Fund
Eaton Vance Mississippi Municipals Fund
Eaton Vance Municipals Trust II
Eaton Vance Florida Insured Municipals Fund Eaton Vance High Yield Municipals Fund
Eaton Vance Hawaii Municipals Fund Eaton Vance Kansas Municipals Fund
Eaton Vance Mutual Funds Trust
Eaton Vance Government Obligations Fund Eaton Vance Strategic Income Fund
Eaton Vance High Income Fund Eaton Vance Tax-Managed Growth Fund
Eaton Vance Special Investment Trust
Eaton Vance Emerging Markets Fund Eaton Vance Special Equities Fund
Eaton Vance Greater India Fund Eaton Vance Stock Fund
Eaton Vance Investors Fund Eaton Vance Total Return Fund
</TABLE>
<PAGE>
September 16, 1997
Schedule A-1
Eaton Vance Mutual Funds Trust
Eaton Vance Tax-Managed Emerging Growth Fund
<PAGE>
October 17, 1997
Schedule A-2
Eaton Vance Mutual Funds Trust
Eaton Vance Municipal Bond Fund
<PAGE>
November 17, 1997
Schedule A-3
Eaton Vance Special Investment Trust
Eaton Vance Russia and Eastern Europe Fund
<PAGE>
January 6, 1998
Schedule A-4
Eaton Vance Mutual Funds Trust
Eaton Vance Tax-Managed International Growth Fund
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EV Marathon California Limited Maturity Municipals Fund-Cl I
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 34,198
<INVESTMENTS-AT-VALUE> 35,823
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647
<TOTAL-LIABILITIES> 647
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,960
<SHARES-COMMON-STOCK> 1,468
<SHARES-COMMON-PRIOR> 2,545
<ACCUMULATED-NII-CURRENT> (91)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,317)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,625
<NET-ASSETS> 35,177
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 934
<EXPENSES-NET> 143
<NET-INVESTMENT-INCOME> 791
<REALIZED-GAINS-CURRENT> 72
<APPREC-INCREASE-CURRENT> 959
<NET-CHANGE-FROM-OPS> 1,822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (801)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (15)
<NUMBER-OF-SHARES-SOLD> 61
<NUMBER-OF-SHARES-REDEEMED> (263)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> (4,928)
<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> 143
<AVERAGE-NET-ASSETS> 20,696
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.20)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EV Marathon Conn. Limited Maturity Municipals Fund-Cl I
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 9,116
<INVESTMENTS-AT-VALUE> 9,498
<RECEIVABLES> 20
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 9,520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 40
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,520
<SHARES-COMMON-STOCK> 605
<SHARES-COMMON-PRIOR> 1,044
<ACCUMULATED-NII-CURRENT> 62
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (483)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 382
<NET-ASSETS> 9,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 248
<EXPENSES-NET> 61
<NET-INVESTMENT-INCOME> 187
<REALIZED-GAINS-CURRENT> (33)
<APPREC-INCREASE-CURRENT> 280
<NET-CHANGE-FROM-OPS> 434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (191)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4)
<NUMBER-OF-SHARES-SOLD> 23
<NUMBER-OF-SHARES-REDEEMED> (135)
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (1,332)
<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> 61
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<TABLE> <S> <C>
<PAGE>
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<NAME> EV Marathon Florida Limited Maturity Municipals Fund-Cl I
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<S> <C>
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<TABLE> <S> <C>
<PAGE>
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<SERIES>
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<NAME> EV Marathon Mass. Limited Maturity Municipals Fund-Cl I
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<S> <C>
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> EV Marathon Michigan Limited Maturity Municipals Fund-Cl I
<MULTIPLIER> 1000
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> EV Marathon New Jersey Limited Maturity Municipals Fund-Cl I
<MULTIPLIER> 1000
<S> <C>
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<TABLE> <S> <C>
<PAGE>
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<SERIES>
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<NAME> EV Marathon New York Limited Maturity Municipals Fund-Cl I
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<PAGE>
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<SERIES>
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<NAME> EV Marathon Ohio Limited Maturity Municipals Fund-Cl I
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<PAGE>
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<NAME> EV Marathon Penn. Limited Maturity Municipals Fund-Cl I
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<PAGE>
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<SERIES>
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<NAME> EV Marathon National Limited Maturity Municipals Fund-Cl I
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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<NAME> FLORIDA LIMITED MUNICIPALS PORTFOLIO
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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<NAME> NEW YORK LIMITED MATURITY MUNICIPALS PORTFOLIO
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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<NAME> OHIO LIMITED MATURITY MUNICIPALS PORTFOLIO
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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