<PAGE>
INVESTMENT ADVISER OF
NATIONAL MUNICIPALS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL NATIONAL
MUNICIPALS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group
Attn: Eaton Vance Funds
P.O. Box 1523
Westborough, MA 01581-1523
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by
a current prospectus which contains more complete information on the Fund,
including its distribution plan, sales charges and expenses. Please read the
prospectus carefully before you invest or send money.
EV TRADITIONAL
NATIONAL MUNICIPALS FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-NASRC-11/96
[logo]
EV TRADITIONAL
NATIONAL
MUNICIPALS FUND
ANNUAL
SHAREHOLDER REPORT
SEPTEMBER 30, 1996
<PAGE>
To Shareholders:
EV Traditional National Municipals Fund paid its shareholders monthly income
dividends totaling $0.666 per share during the year ended Septem-ber 30, 1996.+
Based on the most recent dividend and the Fund's net asset value per share of
$10.58 onSeptember 30, 1996, the Fund's annualized distribution rate at net
asset value was 6.10%. To equal this rate in a taxable investment, a couple in
the 36% federal tax bracket would have to receive a yield of 9.53%.
The year started favorably enough, with the Federal Reserve lowering the Federal
Funds Rate - the rate banks charge each other for overnight loans and a key
short-term interest rate barometer - to 5.25%. By mid-summer, however, reports
of job growth had exceeded market estimates and had raised concerns of a rate
increase. The fall brought news that job growth had once again slowed down and
that inflation was not an imminent threat. Accordingly, the Federal Reserve
effectively put its monetary policy on hold until after the November elections.
An investment in municipal bonds continues to represent good value for
tax-conscious investors for several reasons. First, while turning in somewhat
faster growth than expected, the nation's economy remains subdued. GDP grew at a
revised 4.8% rate in the second quarter - a relatively strong showing, but one
not likely to be sustained over the balance of the year. As recent indicators
suggest, economic growth is beginning to slow, and, more importantly, inflation
remains well under control.
Second, whatever the outcome of the various tax cut proposals that have marked
the campaigns of both major political parties, it is certain that the tax
structure will remain sharply progressive. That means that municipal bonds will
retain their relative value.
- -------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of
September 30, 1996
[graphic omitted] Number of issues............................... 246
Average quality................................ BBB+
Investment grade............................... 36.0%
Effective maturity (years)..................... 12.9
Largest sectors:
Transportation.............................. 15.6%
Escrowed.................................... 12.2
Hospitals................................... 10.5
Industrial development revenue.............. 8.5
Life care................................... 6.2
- -------------------------------------------------------
Third, on the budget front, the deficit has been reduced significantly. At
present, the deficit as a percentage of GDP is the smallest of all
industrialized nations, alleviating near-term borrowing needs.
Finally, and perhaps most important of all, the tax burden of our citizens is
still extraordinarily high.Municipal bonds remain one of the better ways for
most individuals to relieve that burden and keep more of what they work so hard
to earn.We be-lieve that, despite the occasional market fluctua-tions, a
steadfast, long-term outlook is the best way to reap the advantages of tax-free
investing.
[Photo of Thomas J. Fetter] Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter
President
November 4, 1996
+ The Fund's income could be subject to state, local and/or federal alternative
minimum tax.
<PAGE>
Management Report
An interview with Thomas M. Metzold, Portfolio Manager of the National
Municipals Portfolio.
Q. TOM, HOW WOULD YOU EVALUATE THE MUNICIPAL MARKET AND THE FUND'S PER-FORMANCE
DURING THE PAST 12 MONTHS?
A. The bond market has been volatile throughout 1996 in response to an
uncertain economic outlook and wide fluctuations in interest rates. Despite
this volatility, the municipal market managed to outperform the taxable
market during this 12-month period. In fact, the Fund registered a positive
total return for the period, while many other fixed-income investments
suffered losses.
It is especially important to note that municipal bonds have rallied
significantly since the sharp decline of 1994. As a result, those investors
who stayed with the municipal market have fared very well.
Q. HAVE YOU MADE MANY CHANGES TO THE PORTFOLIO IN THE PAST YEAR?
A. I've made relatively few changes during the past 12 months. I prefer not to
initiate change for the sake of mere window dressing. Given my market
outlook, I'm comfortable with the way the Portfolio is structured. Frankly,
there has to be a very compelling reason to make a change.
- ------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- ------------------------------------------------------------------------------
Q. THERE HAVE BEEN SOME CONTRADICTORY ECONOMIC INDICATORS OF LATE. HOW HAVE YOU
DEALT WITH THESE CHANGING VIEWS?
A. The Portfolio's investment mix includes a variety of projects that insulate
the Portfolio from swings in the economy. For example, among our industrial
development bonds, we own bonds with an exposure to a wide range of
industries, including the steel sector, energy, paper products, and
retailing. Elsewhere, we've maintained positions in transportation-related
bonds that finance airport facilities for the nation's major airlines. Thus,
our cyclical investments are spread across a wide economic spectrum.
[Photo of Thomas M. Metzold]
THOMAS M. METZOLD
Of course, we also maintain investments in non-cyclical projects, including
hospitals, assisted living centers, and nursing homes. These projects are
less economically sensitive and tend to be influenced more by demographic
changes and population shifts within their service areas. They therefore add
another level of diversification and help to nicely balance the Portfolio.
Q. IS DIVERSIFICATION AN IMPORTANT ELEMENT OF YOUR INVESTMENT PROCESS?
A. Yes, diversification is one of the keys to managing the Portfolio. To
accomplish that end, I rely heavily on our strong analytical resources here
at Eaton Vance. We try to maintain a Portfolio that represents a good cross
section of the market, according to industry and bond type. We also
diversify according to geographical distribution to avoid concentrating too
much in a single region of the country. Finally, there is diversification in
terms of maturity distribution.
- ------------------------------------------------------------------------------
"THE FUND PROVIDES THE OPPORTUNITY TO INVEST IN PROJECTS ACROSS THE NATION THAT
PROVIDE VITAL COMMUNITY SERVICES AND HELP REBUILD OUR INFRASTRUCTURE."
- ------------------------------------------------------------------------------
Q. YOU MENTIONED EATON VANCE'S RESEARCH CAPABILITIES. COULD YOU EXPAND ON THAT
THEME?
A. Yes. At Eaton Vance, we maintain a strong research effort that provides a
reliable flow of information, ensures that our standards are applied
uniformly, and facilitates the monitoring of our investments. By applying
our own strict investment guidelines, we arrive at a complete picture of how
a bond stacks up. Only after meeting our internal credit standards is a bond
considered for the Portfolio.
Q. WHAT IS THE ROLE OF THE EATON VANCE ANALYST?
A. Our analysts visit hundreds of company, state, local, and agency officials
annually. In addition, they maintain close contact with outside research
sources and major credit ratings agencies to monitor fiscal developments at
the state and local level. That way, we can detect which situations may
present a good opportunity and, equally as important, which ones should be
avoided. Our analysts study fundamentals regarding the overall economic
outlook, as well as those developments that may impact a specific project.
Bond issuers may range from very large state general obligations to a
relatively small industrial project. Whatever the size of the bond, each
potential investment is held to an exacting set of criteria by Eaton Vance
analysts.
Q. WHAT ARE THE MAIN REASONS TO OWN THE EV TRADITIONAL NATIONAL MUNICIPALS
FUND?
A. In my view, there are several reasons why this Fund merits consideration.
First and foremost, there is its relatively high level of tax-exempt income.
While, naturally, the Fund's past performance is no guarantee of future
performance, to enjoy this level of income in a taxable investment, an
investor would need to invest in B-rated corporate bonds. A second reason is
that the Fund adds a good measure of diversification to an investor's
overall portfolio, which typically includes equities as well. Over time,
one's overall risk is smoothed out somewhat by investing in different asset
classes. Finally, the Fund provides the opportunity to invest in projects
across the nation that provide vital community services and help make
improvements to our infrastructure. Investors can have the confidence that
their investments are benefiting the community at large.
Q. THAT LAST POINT IS AN INTERESTING ONE. CAN YOU GIVE AN EXAMPLE OF SUCH A
SITUATION?
A. Yes. The Fund owns revenue bonds issued by the Downtown Development
Authority of Atlanta, GA for the Atlanta Inn for Children. The bonds have an
8% coupon and come due in 2026. The bonds are being used to finance a
day-care facility currently under construction in Atlanta. The project is
sponsored by a consortium of major hotels, including Marriott, Omni, and
Hyatt. The center will be managed by Americare Early Learning Centers, Inc.
and is designed to provide early learning and day-care for children of hotel
employees, as well as classes in parenting skills. The sponsors of the
project have entered into service agreements by which they guarantee
specific student enrollment and a weekly revenue stream. This bond is an
excellent example of an investment that provides a unique, tax-exempt
opportunity for investors and is in concert with a project that will provide
greatly needed services to a community.
Q. IN CLOSING, TOM, WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
A. I'm optimistic about the market for several reasons. First, the economy
continues to muddle along, marked by steady but unspec-tacular growth and
low inflation. That is certainly a good scenario for bonds. Second, the
equity markets have again reached record highs without a significant
correc-tion. That suggests that bonds may be a better value at this point
than equities. Finally, tax-exempt income continues to have great appeal for
investors. Municipal bonds represent the last, readily available way for
taxpayers to reduce their tax burden. For these reasons, I believe
municipals remain a source of continuing value for investors and should
merit consideration for their portfolios.
[graphic omitted]
ATLANTA'S INN FOR CHILDREN
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EV TRADITIONAL
NATIONAL MUNICIPALS FUND AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
From April 30, 1994, through September 30, 1996
EV Traditional National Municipals Fund vs. Lehman Brothers 7-Year Municipal
Bond Index
Date Fund @ NAV Fund w/SC Index
4/30/94 $10,000 $9,623 $10,000
5/31/94 $10,105 $9,724 $10,087
6/30/94 $10,061 $9,682 $10,028
7/31/94 $10,268 $9,882 $10,209
8/31/94 $10,297 $9,909 $10,244
9/30/94 $10,112 $9,731 $10,094
10/31/94 $9,979 $9,603 $9,915
11/30/94 $9,741 $9,374 $9,735
12/31/94 $9,985 $9,609 $9,949
1/31/95 $10,354 $9,964 $10,234
2/28/95 $10,699 $10,296 $10,532
3/31/95 $10,771 $10,365 $10,653
4/30/95 $10,789 $10,382 $10,665
5/31/95 $11,209 $10,787 $11,005
6/30/95 $11,100 $10,682 $10,909
7/31/95 $11,131 $10,712 $11,012
8/31/95 $11,269 $10,844 $11,152
9/30/95 $11,330 $10,904 $11,223
10/31/95 $11,546 $11,111 $11,386
11/30/95 $11,858 $11,412 $11,575
12/31/95 $12,032 $11,579 $11,686
1/31/96 $12,094 $11,639 $11,774
2/28/96 $11,976 $11,524 $11,695
3/31/96 $11,727 $11,285 $11,545
4/30/96 $11,632 $11,193 $11,513
5/31/96 $11,706 $11,265 $11,508
6/30/96 $11,833 $11,388 $11,634
7/31/96 $11,941 $11,491 $11,739
8/31/96 $11,992 $11,540 $11,736
9/30/96 $12,190 $11,731 $11,900
Past performance is not indicative of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
*Investment operations commenced on 4/5/94.
+Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the
Fund's investment operations.
FUND PERFORMANCE
The performance chart above compares your Fund's total return with that of a
broad-based securities market index. The lines on the chart represent the total
returns of $10,000 hypothetical investments in the Fund and the unmanaged Lehman
Brothers Municipal Bond Index.
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
INFORMATION ON DISTRIBUTIONS...
For federal income tax purposes, 99.13% of the total dividends paid by the Fund
from net investment income during the fiscal year that ended September 30, 1996,
is designated as an exempt-interest dividend. Tax legislation eliminated the
exemption to market discount rules applicable to tax-exempt obligations. As a
result, certain tax-exempt obligations acquired by the Portfolio subsequent to
April 30, 1993 at market discounts may generate a small amount of ordinary
taxable income.
- -------------------------------------------------------------------------------
THE TOTAL RETURN FIGURES
The solid red line on the chart represents the Fund's performance at net asset
value. The Fund's total return figure reflects fund expenses and portfolio
transaction costs, and assumes the reinvestment of income dividends and capital
gains distributions.
The dashed red line represents the Fund's performance adjusted for maximum
initial 3.75% sales charge. It reflects Fund expenses and transaction costs and
assumes the reinvestment of all dividends and capital gain distributions.
The black line represents the performance of the Lehman Brothers Municipal Bond
Index, a broad-based, widely recognized unmanaged index of municipal bonds. The
Index's total return does not reflect any commissions or expenses that would be
incurred if an investor individually purchased or sold the securities
represented in the Index. It is not possible to invest directly in this Index.
<PAGE>
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EV TRADITIONAL NATIONAL MUNICIPALS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
September 30, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in National Municipals Portfolio, at value
(Note 1A)
(identified cost, $34,138,971) $35,166,243
Receivable for Fund shares sold 53,127
Deferred organization expenses (Note 1D) 19,687
-----------
Total assets $35,239,057
LIABILITIES:
Dividends payable $112,730
Payable to affiliate --
Trustees' fees 42
Accrued expenses 15,508
--------
Total liabilities 128,280
-----------
NET ASSETS for 3,319,947 shares of beneficial interest
outstanding $35,110,777
===========
SOURCES OF NET ASSETS:
Paid-in capital $34,248,924
Accumulated net realized loss on investment and
financial futures transactions (computed on the
basis of identified cost) (169,999)
Accumulated undistributed net investment income 4,580
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 1,027,272
-----------
Total $35,110,777
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($35,110,777 / 3,319,947 shares of beneficial interest) $10.58
======
COMPUTATION OF OFFERING PRICE PER SHARE:
Offering price per share (100/96.25 of $10.58) $10.99
======
Cn sales of $50,000 or more, the offering price is reduced.
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended September 30, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $2,252,092
Expenses allocated from Portfolio (152,839)
----------
Net investment income $2,099,253
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 162
Custodian fee (Note 1G) 3,197
Distribution costs (Note 5) 23,338
Printing and postage 28,680
Transfer and dividend disbursing agent fees 19,522
Registration costs 18,353
Amortization of organization expenses (Note 1D) 11,269
Legal and accounting services 8,743
Miscellaneous 2,834
--------
Total expenses 116,098
----------
Net investment income $1,983,155
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $(94,894)
Financial futures transactions 57,089
--------
Net realized loss on investments $ (37,805)
Change in unrealized appreciation of investments and
financial futures contracts 268,532
----------
Net realized and unrealized gain $ 230,727
----------
Net increase in net assets from operations $2,213,882
==========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1995
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,983,155 $ 980,373
Net realized loss on investments (37,805) (130,039)
Change in unrealized appreciation of
investments 268,532 833,735
----------- -----------
Net increase in net assets from operations $ 2,213,882 $ 1,684,069
----------- -----------
Distributions to shareholders (Note 2) --
From net investment income $(1,976,984) $ (980,373)
In excess of net investment income -- (1,334)
----------- -----------
Total distributions to shareholders $(1,976,984) $ (981,707)
----------- -----------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $16,306,575 $23,193,540
Net asset value of shares issued to
shareholders in payment of distributions
declared 701,768 373,616
Cost of shares redeemed (8,658,429) (2,026,944)
----------- -----------
Increase in net assets from Fund share
transactions $ 8,349,914 $21,540,212
----------- -----------
Net increase in net assets $ 8,586,812 $22,242,574
NET ASSETS:
At beginning of year 26,523,965 4,281,391
----------- -----------
At end of year (including undistributed
(distributions in excess of) net investment
income of $4,580 and ($1,591), respectively) $35,110,777 $26,523,965
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
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YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994*
------- ------- -------
NET ASSET VALUE, beginning of year $10.470 $10.000 $10.000
------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.668 $ 0.691 $ 0.334
Net realized and unrealized gain on
investments 0.108 0.471 0.002++
------- ------- -------
Total income from operations $ 0.776 $ 1.162 $ 0.336
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.666) $(0.691) $(0.334)
In excess of net investment income -- (0.001) (0.002)
------- ------- -------
Total distributions $(0.666) $(0.692) $(0.336)
------- ------- -------
NET ASSET VALUE, end of year $10.580 $10.470 $10.000
======= ======= =======
TOTAL RETURN(2) 7.59% 12.10% 3.34%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period (000 omitted) $35,111 $26,524 $ 4,281
Ratio of net expenses to average
daily net assets (1)(3) 0.86% 0.67% 0.43%+
Ratio of net expenses to average
daily net assets after custodian
fee reduction (1) 0.85% 0.66% --
Ratio of net investment income to
average daily net assets 6.28% 6.60% 5.97%+
**For the period from the start of business, April 5, 1994, to September 30,
1994 and for the year ended September 30, 1995, the operating expenses of
the Fund reflect an allocation of expenses to the Administrator. Had such
action not been taken, net investment income per share and the ratios would
have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.646 $ 0.255
======= =======
RATIOS (As a percentage of average daily net assets):
Expenses (1)(3) 1.10% 1.84%+
Net investment income 6.17% 4.56%+
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gains and losses for the period because of the timing of sales of Fund
shares and the amount of per share realized and unrealized gains and losses
at such time.
(1) Includes the Fund's share of National Municipals Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the payable date. Total return is computed on a
non-annualized basis.
(3) The expense ratios for the years ended September 30, 1996 and 1995 have been
adjusted to reflect a change in reporting requirements. The new reporting
guidelines require the Fund, as well as the National Municipals Portfolio,
to increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratio for the year
ended September 30, 1994 has not been adjusted to reflect this change.
* For the period from the start of business, April 5, 1994, to September
30, 1994.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional National Municipals Fund (the Fund) is a diversified series of
Eaton Vance Municipals Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund invests all of its investable assets in interests
in the National Municipals Portfolio (the Portfolio), a New York Trust, having
the same investment objective as the Fund. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net assets
of the Portfolio (1.6% at September 30, 1996). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATION -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At September 30, 1996, the Fund,
for federal income tax purposes had a capital loss carryover of $158,203 which
will reduce the taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code, and
thus will reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal income
or excise tax. Such capital loss carryover will expire on September 30, 2002
($20) and September 30, 2004 ($158,183). Additionally, at September 30, 1996,
net capital losses of $122,250 attributable to security transactions incurred
after October 31, 1995, are treated as arising on the first day of the Fund's
next taxable year. Dividends paid by the Fund from net tax-exempt interest on
municipal bonds allocated from the Portfolio are not includable by
shareholders as gross income for federal income tax purposes because the Fund
and Portfolio intend to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Fund to pay
exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item to shareholders.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
F. OTHER -- Investment transactions are accounted for on a trade date basis.
G. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Prior to November 10, 1995, IBT was
an affiliate of EVM. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average cash balances the
Fund or the Portfolio maintain with IBT. All significant credit balances used
to reduce the Fund's custodian fees are reported as a reduction of expenses in
the statement of operations.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of the Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. Distributions are paid monthly. Distributions of allocated
realized capital gains, if any, are made at least annually. Shareholders may
reinvest capital gain distributions in additional shares of the Fund at the net
asset value as of the ex-dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholder, in cash. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital. The
tax treatment of distributions will be reported to shareholders prior to
February 1, 1997 and will be based on tax accounting methods which may differ
from amounts determined for financial statement purposes.
- ------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
-------- --------
Sales 1,539,028 2,266,182
Issued to shareholders electing to receive
payments of distributions in Fund shares 66,251 36,637
Redemptions (818,680) (197,644)
--------- ---------
Net increase 786,599 2,105,175
========= =========
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(4) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. Except as to Trustees of the Fund and the Portfolio
who are not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to the Fund out of the investment
adviser fee earned by BMR. Eaton Vance Distributors, Inc. (EVD), a subsidiary
of EVM and the Fund's Principal Underwriter, did not receive any portion of
the sales charge on sales of Fund shares for the year ended September 30,
1996. Certain of the officers and Trustees of the Fund and of the Portfolio
are officers and/or directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Fund has adopted a Service Plan designed to meet the service fee
requirements of the sales charge rule of The National Association of
Securities Dealers, Inc. The Service Plan provides that the Fund may make
service fee payments to the Principal Underwriter, Eaton Vance Distributors,
Inc. (EVD), a subsidiary of Eaton Vance Management, Authorized Firms or other
persons in amounts not exceeding 0.25% of the Fund's average daily net assets
for any fiscal year. The Trustees have initially implemented the Plan by
authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not exceeding 0.25% of the Fund's
average daily net assets for any fiscal year which is attributable to shares
of the Fund sold by such persons and remaining outstanding for at least one
year. Service fee payments are made for personal services and/or the
maintenance of shareholder accounts. The Fund paid or accrued service fees for
the year ended September 30, 1996 of $23,338.
Certain of the officers and Trustees of the Fund are officers and directors
of EVD.
- ------------------------------------------------------------------------------
(6) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the year
ended September 30, 1996 aggregated $16,746,375 and $10,158,543, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF
EATON VANCE MUNICIPAL TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Traditional National Municipals Fund (one of the series of Eaton Vance
Municipals Trust) as of September 30, 1996, the related statement of
operations for the year then ended, the statements of changes in net assets
for the years ended September 30, 1996 and 1995 and the financial highlights
for the years ended September 30, 1996 and 1995 and for the period from the
start of business, April 5, 1994, to September 30, 1994. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of EV Traditional
National Municipals Fund series of Eaton Vance Municipals Trust at September
30, 1996, the results of its operations, the changes in its net assets, and
its financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
NOVEMBER 1, 1996
<PAGE>
------------------------------------
NATIONAL MUNICIPALS PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 99.96%
- -------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
STANDARD AMOUNT
MOODY'S & POOR'S (000 OMITTED SECURITY VALUE
- -----------------------------------------------------------------------------
ASSISTED LIVING FACILITIES - 5.7%
NR NR $ 6,035 Arizona Health Facilities
Authority, Mesa
Project, 7.625%, 1/1/26 $ 5,701,808
NR NR 17,070 Bell County, Texas,
Health Facilities, Care
Institute Inc., 9%, 11/1/24 18,398,046
NR NR 7,000 Chester County,
Pennsylvania, IDB,
Senior Life Choice of
Paoli, L.P., 8.05%, 1/1/24 7,059,010
NR NR 3,060 Chester County,
Pennsylvania, Kimberton
Project (AMT), 8.5%, 9/1/25 3,192,467
NR NR 12,555 Dekalb Private Hospital,
Georgia GF/Atlanta,
8.5%, 3/1/25 12,754,750
NR NR 5,000 Delaware County,
Pennsylvania, Glen
Riddle Project (AMT),
8.625%, 9/1/25 5,264,050
NR NR 18,740 Illinois Development
Finance Authority, Care
Institute Inc., 7.8%,
6/1/25 18,140,133
NR NR 18,545 Louisiana HFA - HCC
Assisted Living Group
1, 9%, 3/1/25 18,994,716
NR NR 10,000 New Jersey EDA, Forsgate
Project (AMT), 8.625%,
6/1/25 9,982,100
NR NR 7,915 Roseville, Minnesota,
Elder Care Facility,
Care Institute Inc.,
7.75%, 11/1/23 7,969,139
NR NR 12,430 St. Paul, Minnesota,
Housing and
Redevelopment, Care
Institute, Inc.,
Highland Park, 8.75%,
11/1/24 13,228,130
NR NR 5,000 Village of North
Syracuse, New York,
Housing Authority, AJM
Senior Housing, Inc.,
Janus Park, 8%, 6/1/24 4,972,100
--------------
$ 125,656,449
--------------
COGENERATION FACILITIES - 4.2%
NR NR $ 20,250 Maryland Energy, AES
Warrior Run Project
(AMT), 7.4%, 9/1/19 $ 21,173,400
NR BB+ 21,650 New Jersey EDA, Vineland
Cogeneration Limited
Partnership Project
(AMT), 7.875%, 6/1/19 23,393,258
NR NR 2,300 Palm Beach County,
Florida, Solid Waste
IDR, Osceola Power
Limited Partnership
Project (AMT), 6.95%,
1/1/22 2,050,726
NR NR 5,000 Pennsylvania EDA,
Northampton Generating
Project, Junior Liens
(AMT), 6.95%, 1/1/21 4,871,950
NR NR 7,000 Pennsylvania EDA,
Northampton Generating
Project, Junior Liens
(AMT), 6.875%, 1/1/11 6,826,820
NR NR 18,450 Pennsylvania EDA,
Northampton Generating
Project (AMT),
6.6%, 1/1/19 17,867,349
NR NR 6,100 Pennsylvania EDA,
Northampton Generating
Project (AMT),
6.5%, 1/1/13 5,973,608
NR NR 10,000 Pennsylvania EDA, Colver
Project (AMT), 8.05%,
12/1/15 10,462,300
--------------
$ 92,619,411
--------------
COLLEGES & UNIVERSITIES - 0.4%
NR BBB- $ 3,300 Massachusetts Health and
Educational Facilities,
Nichols College,
7%, 10/1/20 $ 3,464,340
NR NR 4,360 New Hampshire Higher
Educational and Health,
Franklin Pierce Law
Center, 7.5%, 7/1/22 4,463,201
--------------
$ 7,927,541
--------------
ESCROWED - 12.2%
NR AAA $ 65,000 Bakersfield, California,
Bakersfield Assisted
Living Center, 0%, 4/15/21 $ 12,039,950
NR NR 2,200 Bexar County, Texas,
Health Facilities, St.
Luke's Lutheran, 7%, 5/1/21 2,527,492
NR AAA 177,055 Colorado HFA, Retirement
Housing, Liberty
Heights Project,
0%, 7/15/24 25,743,797
NR AAA 27,870 Colorado HFA, Retirement
Housing, Liberty
Heights Project,
0%, 7/15/20 5,348,532
Aaa NR 29,600 Colorado HFA, Retirement
Housing, Liberty
Heights Project,
0%, 7/15/22 4,944,680
Aaa NR 225,500 Dawson Ridge Metropolitan
District No. 1, Douglas
County, Colorado, 0%,
10/1/22 37,234,560
Ba1 AAA 10,000 Detroit, Michigan,
Unlimited Tax, 8.7%, 4/1/10 11,463,800
Ba1 AAA 3,500 Detroit, Michigan,
Unlimited Tax, Series
1991, 8%, 4/1/11 4,027,555
Ba1 NR 3,090 Montgomery County,
Pennsylvania, United
Hospitals, Inc.,
7.5%, 11/1/13 3,348,139
Ba1 NR 2,000 Montgomery County,
Pennsylvania, United
Hospitals, Inc.,
7.5%, 11/1/14 2,167,080
Ba1 NR 3,465 Montgomery County,
Pennsylvania, United
Hospitals, Inc.,
7.5%, 11/1/15 3,754,466
NR NR 7,000 Florida, Mid-Bay Bridge
Authority Revenue
Bonds, 6.875%, 10/1/22 7,952,420
NR AAA 30,360 Illinois Development
Finance Authority,
Regency Park at
Lincolnwood, 0%, 7/15/25 4,005,698
NR AAA 186,555 Illinois Development
Finance Authority,
Regency Park at
Lincolnwood, 0%, 7/15/23 28,332,108
NR AAA 4,000 Jackson County, Oklahoma,
Jackson County Memorial
Hospital, 9%, 8/1/15 4,245,240
NR AAA 12,750 Louisiana Public
Facilities Authority,
Southern Baptist
Hospitals, Inc.,
8%, 5/15/12 14,972,070
Aaa NR 138,000 Mississippi Housing
Finance Corporation,
Single Family Mortgage,
0%, 6/1/15 46,205,160
Aaa NR 6,130 North Salt Lake Municipal
Building Authority,
Davis County, Utah,
8.625%, 12/1/17 7,374,819
Baa AAA 4,000 Philadelphia, Pennsylvania,
Municipal Water Finance
Authority, 7%, 8/1/18 4,407,120
NR NR 3,465 Scottsdale, Arizona, IDA,
Westminster Village,
Inc., 10%, 6/1/07 3,705,055
Aaa AAA 19,165 Texas Turnpike Authority,
Houston Ship Channel
Bridge, 12.625%, 1/1/20 26,831,192
NR NR 5,120 Vermont Educational and
Health Buildings
Financing Agency,
Northwestern Medical
Center Project, 9.75%,
9/1/18 5,720,730
Aaa AAA 2,675 Washington Public Power
Supply System, Nuclear
Project No. 1,
14.375%, 7/1/01 3,384,169
--------------
$ 269,735,832
--------------
HOSPITALS - 10.5%
NR BBB $ 7,000 Arizona Health
Facilities, Phoenix
Memorial, 8.2%, 6/1/21 $ 7,599,130
NR NR 2,425 Berlin, Maryland,
Atlantic General,
8.375%, 6/1/22 2,562,425
Baa NR 10,180 Chaves County, New
Mexico, Eastern New
Mexico Medical Center,
7.25%, 12/1/22 10,573,864
NR BBB+ 8,405 Christian County,
Kentucky, Jennie Stuart
Medical Center,
7.625%, 4/1/10 8,647,989
Baa BBB 32,000 Colorado Health
Facilities, Rocky
Mountain Adventist
Healthcare, 6.625%, 2/1/22 32,352,640
NR BBB- 3,000 Colorado Health
Facilities, National
Jewish Center For
Immunology and
Respiratory Medicine,
6.875%, 2/15/12 3,017,700
NR BBB- 5,015 Colorado Health
Facilities, National
Jewish Center For
Immunology and
Respiratory Medicine,
7.1%, 2/15/22 5,018,109
Baa1 NR 4,000 Crossville, Tennessee,
HEFA, Cumberland
Medical Center,
6.75%, 11/1/12 4,090,280
Baa1 BBB 6,000 District of Columbia,
Washington Hospital
Center Issue-Medlantic
Healthcare Group, Inc.,
7.125%, 8/15/19 6,221,340
NR A- 5,000 Dubuque, Iowa, Finley
Hospital Project,
6.875%, 1/1/12 5,322,050
NR BBB- 5,545 Grove City Area Hospital
Authority, Pennsylvania,
United Community Hospital,
8.125%, 7/1/12 5,687,007
NR BBB- 4,000 Hawaii Department of
Budget and Finance,
Special Purpose
Mortgage Revenue,
Wahiawa General
Hospital, 7.5%, 7/1/12 4,149,640
NR NR 4,620 Health Services Authority
of Hazleton, Luzerne
County, Pennsylvania,
Hazleton-Saint Joseph
Medical Center, 8.375%,
7/1/12 4,803,968
NR NR 4,650 Illinois, Chicago
Osteopathic Health
Systems, 7.125%, 5/15/11 5,249,013
NR NR 4,500 Illinois, Chicago
Osteopathic Health
Systems, 7.25%, 5/15/22 5,331,780
Baa1 NR 1,000 Illinois HFA, Holy Cross
Hospital, 6.7%, 3/1/14 1,011,260
Baa1 NR 2,650 Illinois HFA, Holy Cross
Hospital, 6.75%, 3/1/24 2,690,333
Baa NR 4,500 Indiana Health Facility
Financing Authority,
Memorial Hospital and
Health Care Center,
7.4%, 3/1/22 4,644,360
NR BBB 8,250 Louisiana Public Finance
Authority, General
Health Systems Project,
6.8%, 11/1/16 8,316,908
Baa1 BBB+ 3,750 Louisiana Public
Facilities Authority,
Woman's Hospital
Foundation, 7.25%, 10/1/22 3,988,913
NR BBB- 9,855 Lufkin Health Facilities
Development Cooration, Memorial
Health System of East Texas,
6.875%, 2/15/26 10,005,190
Baa BBB- 10,000 Maricopa County, Arizona,
Sun Health Corporation,
8.125%, 4/1/12 10,954,300
Baa NR 2,000 Marshall County, Alabama,
Guntersville-Arab
Medical Center,
7%, 10/1/09 2,066,180
Baa NR 2,000 Marshall County, Alabama,
Guntersville-Arab
Medical Center,
7%, 10/1/13 2,055,420
Baa BB 3,900 Massachusetts Health and
Education Facilities
Authority, Milford-
Whitinsville Hospital,
7.75%, 7/15/17 4,063,098
NR BBB 6,000 Midland County Hospital
District, Memorial
Hospital and Medical
Center, 0%, 6/1/07 3,121,260
NR BBB 6,500 Midland County Hospital
District, Memorial
Hospital and Medical
Center, 0%, 6/1/11 2,493,205
Ba NR 5,000 Mississippi Hospital
Equipment and
Facilities Authority,
Magnolia Hospital,
7.375%, 10/1/21 5,069,350
A BBB+ 10,000 Philadelphia,
Pennsylvania, Albert
Einstein Medical
Center, 7%, 10/1/21 10,550,400
Baa1 BBB+ 9,000 Philadelphia,
Pennsylvania, Graduate
Health System Obligated
Group, 6.625%, 7/1/21 8,748,450
Baa NR 5,000 Prince George's County,
Maryland, Greater
Southeast Healthcare
System, 6.375% 1/1/23 4,700,250
Baa1 BBB+ 10,000 Randolph County Building
Commission, West
Virginia, Davis
Memorial Hospital,
7.65%, 11/1/21 10,685,600
NR BB+ 8,000 Scranton-Lackawanna
Health and Welfare
Authority, Pennsylvania
Moses Taylor Hospital,
8.25%, 7/1/09 8,513,440
NR BB+ 4,500 Scranton-Lackawanna
Health and Welfare
Authority, Pennsylvania,
Moses Taylor Hospital,
8.5%, 7/1/20 4,814,775
Baa BBB 8,000 South Dakota HEFA,
Prairie Lakes Health
Care System Issue,
7.25%, 4/1/22 8,372,880
NR NR 4,900 Winslow, Arizona, IDA,
Winslow Memorial
Hospital, 9.5%, 6/1/22 5,391,127
--------------
$ 232,883,634
--------------
HOTELS - 0.4%
NR NR $ 1,929 Illinois Development
Finance Authority,
Comfort Inn - O'Hare,
10%, 5/1/16 $ 2,082,860
NR NR 1,046 Illinois Development
Finance Authority,
Comfort Inn - O'Hare,
2.5%, 5/1/16 587,464
NR NR 1,025 Kirksville, Missouri,
IDA, Holiday Inn,
10.5%, 7/1/03 (4) 563,750
NR NR 3,615 Kirksville, Missouri,
IDA, Holiday Inn, 11%,
7/1/16 (4) 1,988,250
NR NR 4,205 Niagara County, New York,
IDA, Wintergarden Inn
Associates,
9.75%, 6/1/11 (4) 2,312,750
NR NR 1,775 Orange Beach, Alabama,
Romar Hotels, Inc.,
10.5%, 4/1/16 1,823,937
--------------
$ 9,359,011
--------------
HOUSING - 2.7%
Aa AA- $ 9,700 California Housing
Finance Agency (AMT),
Residual Interest
Bonds, Variable Rate,
8/1/23(1) $ 10,160,750
Aa NR 5,000 Colorado Housing and
Finance Authority,
Single Family Program
1996 Series C, 7.55%,
11/1/27 5,462,500
NR NR 9,500 Lake Creek Affordable
Housing Corporation,
Multifamily Housing,
8%, 12/1/23 9,791,175
NR NR 8,000 Los Angeles County
Housing Authority,
California, Multifamily
Housing, Corporate Fund
for Housing Projects,
10.5%, 12/1/29 8,178,720
NR NR 1,300 Lucas County, Ohio, EDA,
County Creek Project
(AMT), 8%, 7/1/26 1,235,052
NR BBB+ 2,000 Massachusetts Housing
Finance Authority,
Multifamily, Harbor
Point Revenue (AMT),
8%, 12/1/15 2,053,720
NR NR 3,305 Minneapolis Community
Development, Multifamily,
Lindsay Brothers,
9.5%, 12/1/07 3,493,749
NR NR 2,185 Minneapolis Community
Development, Multifamily,
Lindsay Brothers,
1.5%, 12/1/07 1,139,630
NR NR 4,740 North Little Rock,
Arkansas, Residential
Housing Facilities,
Parkstone Place,
9.75%, 8/1/21 4,955,433
NR NR 4,000 North Miami, Florida,
Health Care Facilities,
The Imperial Club,
10%, 1/1/13 3,773,440
NR NR 8,840 North Miami, Florida,
Health Care Facilities,
The Imperial Club,
9.25%, 1/1/13 9,622,694
--------------
$ 59,866,863
--------------
INDUSTRIAL DEVELOPMENT
REVENUE - 8.5%
NR NR $ 7,500 Austin-Bergstrom
International Airport
Development
Corporation, Texas,
Austin Cargoport
Development L.L.C.
Project (AMT), 8.3%,
10/1/21 $ 7,499,925
Baa2 NR 3,000 Camden, Alabama, IDB,
MacMillan Bloedel
Project, 7.75%, 5/1/09 3,226,170
NR NR 2,000 Camden County, New
Jersey, Holt Hauling
and Warehousing System,
Inc. Project (AMT),
9.875%, 1/1/21 2,021,200
NR NR 4,140 College Park, Georgia,
Airport Parking
Venture, 10%, 5/15/16 3,726,000
Baa1 BBB 24,000 Courtland, Alabama, IDB,
Champion International
Corporation (AMT), 7%,
6/1/22 25,169,040
NR NR 8,040 East Chicago, Indiana,
PCR, Inland Steel
Company Project #9
(AMT), 10%, 11/1/11 8,313,280
Ba3 BB 3,145 East Chicago, Indiana,
PCR, Inland Steel
Company Project (AMT),
6.8%, 6/1/13 3,173,462
Baa1 BBB 21,480 Gulf Coast Waste
Disposal, Texas,
Champion International
Corporation (AMT),
6.875%, 12/1/28 22,277,982
NR NR 5,928 Gwinnett County, Georgia,
IDR, Plastics/
Packaging, Inc. (AMT),
10.75%, 5/1/13 3,556,542
NR NR 1,595 Kansas City, Missouri,
IDA, AFCO CARGO MCI
Limited Partnership
Project (AMT), 8.5% 1/1/17 1,738,391
NR NR 6,500 Kimball, Nebraska, EDA,
Clean Harbors, Inc.
Project (AMT),
10.75%, 9/1/26 6,533,280
Baa1 BBB 10,000 Maine Finance Authority,
Great Northern Paper,
Inc., Project - Bowater
Incorporated (AMT),
7.75%, 10/1/22 10,892,600
NR BB+ 5,000 Maine Solid Waste
Disposal, Boise Cascade
Corporation (AMT),
7.9%, 6/1/15 5,420,450
NR NR 1,700 Massachusetts Industrial
Finance Agency, IDR,
Boston Beer Company
(AMT), 11.5%, 7/15/07 1,834,147
Baa1 BBB 5,000 McMinn County, Tennessee,
IDB, Calhoun Newsprint
Company Project -
Bowater Incorporated
(AMT), 7.4%, 12/1/22 5,371,400
NR NR 10,000 Michigan Strategic, S.D.
Warren Co., Series 87A
(AMT), 7.375%, 1/15/22 10,253,400
NR NR 15,000 Michigan Strategic, S.D.
Warren Co., Series 87B
(AMT), 7.375%, 1/15/22 15,380,100
NR NR 4,200 Middleboro, Massachusetts,
IDR, Read Corporation,
9.5%, 10/1/10 4,196,682
NR NR 4,000 New Jersey, EDA, Holt
Hauling and Warehousing
System, Inc. Project,
10.25%, 9/15/24 4,178,240
NR NR 1,000 State of Ohio Solid
Waste, Republic
Engineered Steel, Inc.
Project (AMT), 9%, 6/1/21 1,045,370
Baa2 BBB- 7,500 Pennsylvania, EDA,
MacMillan Bloedel
Project (AMT), 7.6%,
12/1/20 8,304,750
Baa1 BBB+ 10,000 Pennsylvania, EDA, Sun
Company, Inc. (R&M)
(AMT), 7.6%, 12/1/24 11,129,100
Baa3 BBB- 12,000 Port of Corpus Christi,
Texas, Valero Refining
& Marketing Company,
10.25%, 6/1/17 12,766,680
B1 B 2,000 Riverdale Village,
Illinois, IDA, ACME
Metals, Inc. Project
(AMT), 7.95%, 4/1/25 2,017,220
B1 B 2,585 Riverdale Village,
Illinois, IDA, ACME
Metals, Inc. Project
(AMT),7.90%, 4/1/24 2,599,708
NR NR 2,605 Savannah, Georgia, IDR,
Intercat - Savannah,
Inc. (AMT), 9.75%, 7/1/10 2,782,244
NR NR 4,000 Savannah, Georgia, IDR,
Intercat - Savannah,
Inc. (AMT), 9%, 1/1/15 4,234,240
--------------
$ 189,641,603
--------------
INSURED GENERAL
OBLIGATIONS - 1.1%
Aaa AAA $ 10,000 California General
Obligation, (FSA),
4.75%, 9/1/18 $ 8,678,300
Aaa AAA 19,500 California General
Obligation, (FGIC),
4.75%, 9/1/23 16,691,025
--------------
$ 25,369,325
--------------
INSURED HOSPITALS - 0.9%
Aaa AAA $ 10,000 Louisville, Kentucky,
Alliant Health System,
Inc., (MBIA), Variable
Rate, 10/1/14 (1) $ 11,250,000
Aaa AAA 7,000 Montgomery County,
Pennsylvania, Abington
Memorial Hospital,
(AMBAC), Variable Rate,
6/1/11 (1) 7,854,770
--------------
$ 19,104,770
--------------
INSURED HOUSING - 0.4%
Aaa AAA $ 7,525 SCA Multifamily Mortgage,
IDB, Hamilton County,
Tennessee (AMT), (FSA),
7.35%, 1/1/30 $ 8,101,415
--------------
INSURED INDUSTRIAL
DEVELOPMENT REVENUE - 0.5%
Aaa AAA $ 11,950 Chicago, Illinois, The
Peoples Gas Light and
Coke Company (AMT),
(AMBAC), Residual
Interest Bonds,
Variable Rate, 12/1/23 (1) $ 11,083,625
--------------
INSURED SPECIAL TAX
REVENUE - 5.7%
Aaa AAA $ 20,000 Los Angeles County,
California,
Metropolitan
Transportation,
(AMBAC), 4.75%, 7/1/18 $ 17,388,000
Aaa AAA 92,995 Metropolitan Pier and
Exposition Authority,
Illinois, McCormick
Place Expansion
Project, (MBIA), 0%, 6/15/28 13,848,815
Aaa AAA 92,995 Metropolitan Pier and
Exposition Authority,
Illinois, McCormick
Place Expansion
Project, (FGIC), 0%, 6/15/29 13,041,618
Aaa AAA 9,800 Metropolitan Pier and
Exposition Authority,
Illinois, McCormick
Place Expansion
Project, Residual
Interest Bonds, (MBIA),
Variable Rate,
6/15/27 (1) 9,873,500
Aaa AAA 3,415 New Orleans Regional
Transit Authority,
Louisiana, Sales Tax,
(FGIC), 0%, 12/1/12 1,352,716
Aaa AAA 10,935 New Orleans Regional
Transit Authority,
Louisiana, Sales Tax,
(FGIC), 0%, 12/1/15 3,547,205
Aaa AAA 10,000 New Orleans Regional
Transit Authority,
Louisiana, Sales Tax,
(FGIC), 0%, 12/1/21 2,208,700
Aaa AAA 10,655 Rancho Mirage,
California, Water
District Financing,
(AMBAC), 4.75%, 8/15/21 9,196,863
Aaa AAA 13,350 Rancho Mirage,
California, Whitewater
Redevelopment Project,
(MBIA), 5%, 4/1/24 12,068,534
Aaa AAA 40,000 South Orange, California,
Public Financing,
Foothill Area, (FGIC),
5.5%, 8/15/15 37,842,400
Aaa AAA 7,000 Utah Municipal Finance
Corporation, Local
Government Revenue,
(FSA), 0%, 3/1/10 3,266,970
Aaa AAA 6,000 Utah Municipal Finance
Corporation, Local
Government Revenue,
(FSA), 0%, 3/1/11 2,627,220
--------------
$ 126,262,541
--------------
INSURED TRANSPORTATION - 2.0%
Aaa AAA $ 14,400 Metropolitan Washington
Airports Authority,
Residual Interest
Bonds, (MBIA), Variable
Rate, 10/1/21 (1) $ 14,022,000
Aaa AAA 18,200 Mobile, Alabama, Airport
Authority, (MBIA),
6.375%, 10/1/14 19,312,202
Aaa AAA 10,000 Triborough Bridge and
Tunnel Authority,
(MBIA), Variable Rate,
1/1/19 (1) 10,142,500
--------------
$ 43,476,702
--------------
INSURED UTILITY REVENUE
BONDS - 5.5%
Aaa AAA $ 10,000 Intermountain Power
Agency, Utah, (MBIA),
6%, 7/1/16 $ 10,240,500
Aaa AAA 32,000 Intermountain Power
Agency, Utah, (MBIA),
5.75%, 7/1/19 (2) 30,610,240
Aaa AAA 16,500 Sacramento, California,
Municipal Utility
District, (MBIA),
Variable Rate, 11/15/15 (1) 15,345,000
Aaa AAA 21,000 Sacramento, California,
Municipal Utility
District, (MBIA),
4.75%, 9/1/21 18,074,910
Aaa AAA 7,500 South Carolina Public
Services, Forwards,
Series 96A, (MBIA),
5.75%, 1/1/22 7,459,650
Aaa AAA 15,350 South Carolina Public
Services, Residual
Interest Bonds, (FGIC),
Variable Rate, 1/1/25 (1) 11,704,375
Aaa AAA 29,450 Washington Public Power
Supply System, Nuclear
Project No. 2, (MBIA),
4.8%, 7/1/04 28,627,167
--------------
$ 122,061,842
--------------
INSURED WATER & SEWER - 1.2%
Aaa AAA $ 10,000 Detroit, Michigan, Sewer
Revenue, (FGIC),
Variable Rate, 7/1/23 (1) $ 9,225,000
Aaa AAA 7,150 Harrisburg, Pennsylvania,
Water Revenue Bonds,
Residual Interest
Bonds, (FGIC), Variable
Rate, 8/11/16 (1) 6,104,313
Aaa AAA 10,000 New York City Municipal
Water Finance Authority,
(FSA), Variable Rate,
6/15/21 (1) 10,387,500
--------------
$ 25,716,813
--------------
LEASE/CERTIFICATE OF
PARTICIPATION - 1.1%
A A $ 16,500 Indiana Transportation
Finance, Airport
Facilities, 6.25%, 11/1/16 $ 16,707,405
NR A- 3,500 Plymouth County,
Massachusetts, COP,
Plymouth County
Correctional Facility,
7%, 4/1/22 3,836,245
NR NR 2,500 St. Louis, Missouri,
Convention and Sports
Facility, 7.9%, 8/15/21 2,749,100
--------------
$ 23,292,750
--------------
LIFE CARE - 6.2%
NR NR $ 8,616 Albuquerque, New Mexico,
First Mortgage IDR, La
Vida Llena Retirement
Center, 8.625%, 2/1/20 $ 9,151,829
NR NR 7,000 Albuquerque, New Mexico,
First Mortgage IDR, La
Vida Llena
Retirement Center,
8.85%, 2/1/23 7,491,540
NR NR 5,744 Albuquerque, New Mexico,
First Mortgage IDR, La
Vida Llena
Retirement Center
2.25%, 2/1/23 1,976,912
NR NR 10,000 Atlantic Beach, Florida,
Fixed Rate Improvement,
Fleet Landing Project,
8%, 10/1/24 10,362,200
NR NR 4,215 Florence, Kentucky,
Housing Facilities,
Bluegrass RHF Housing,
Inc., 9.5%, 7/1/17 4,288,215
NR NR 6,595 Fulton County Residential
Care Facilities for the
Elderly Authority,
Georgia, Lenbrook
Square Foundation,
Inc., 9.75%, 1/1/17 6,777,286
NR NR 4,300 Kansas City, Missouri,
IDA, Kingswood United
Methodist Manor,
9%, 11/15/13 4,656,857
NR NR 2,100 Loudon County, Virginia,
IDA, Residential Care,
Falcons Landing,
9.25%, 11/1/04 2,258,109
NR NR 20,400 Loudon County, Virginia,
IDA, Residential Care,
Falcons Landing,
8.75%, 11/1/24 20,700,492
NR NR 1,950 New Hampshire Higher
Educational & Health
Facilities, Riverwoods
at Exeter, 8%, 3/1/01 1,998,302
NR NR 10,000 New Hampshire Higher
Educational & Health
Facilities, Riverwoods
at Exeter, 9%, 3/1/23 10,842,300
NR NR 3,500 New Jersey EDA, Cadbury
Corporation-1991
Project, 7.5%, 7/1/21 3,511,585
NR NR 20,000 New Jersey EDA, Keswick
Pines Project, 8.75%,
1/1/24 21,045,400
NR NR 5,800 Ridgeland, Mississippi,
Urban Renewal, The
Orchard Project Series
1993A, 7.75%, 12/1/15 5,868,034
NR NR 13,955 St. Tammany Public
Finance, Christwood
Project, 9%, 11/15/25 14,800,393
NR NR 7,500 Vermont IDA, Wake Robin
Corporation, 8.75%, 4/1/23 8,125,800
NR NR 4,500 Vermont IDA, Wake Robin
Corporation, 8.75%, 3/1/23 4,812,885
--------------
$ 138,668,139
--------------
MISCELLANEOUS - 2.5%
NR NR $ 6,530 American Samoa Economic
Development, Executive
Office Building,
10.125%, 9/1/08 $ 7,171,638
NR NR 1,465 Atlanta, Georgia,
Downtown Development
Authority, Central
Atlanta Hospitality
Childcare, Inc., 8%, 1/1/26 1,401,214
NR A- 6,500 Los Angeles Regional
Airports Improvement
Corporation, LAXFuel
(AMT), 6.5%, 1/1/32 6,570,395
NR NR 4,710 Mille Lacs Capital
Improvements, Mille
Lacs Band of Chippewa
Indians, 9.25%, 11/1/12 5,278,544
NR NR 22,500 New Jersey, Sports &
Exhibition Authority,
Monmouth Park Project,
8%, 1/1/25 24,453,000
NR NR 10,200 Orange County Community
Activity Center Revenue
Bonds, 8%, 3/1/24 10,459,080
--------------
$ 55,333,871
--------------
NURSING HOME - 7.7%
NR NR $ 13,550 Bell County, Texas,
Riverside Healthcare,
Inc.- Normandy Terrace,
9%, 4/1/23 $ 14,739,961
NR NR 4,910 Collier County, Florida,
IDA, Retirement Rental,
Beverly Enterprises -
Florida, Inc., 10.75%,
3/1/03 5,560,722
NR NR 5,000 Delaware County,
Pensylvania, Mainline -
Haverford Nursing and
Rehabilitation Centers,
9%, 8/1/22 5,496,100
NR NR 5,460 Hillsborough County,
Florida, IDA, Center
for Independent Living,
Tampa Projects,
11%, 3/1/19 (5) 4,914,000
NR NR 4,650 Hillsborough County,
Florida, IDA, Center
for Independent Living,
Tampa Projects, 10.25%,
3/1/09 (5) 4,185,000
Baa1 NR 10,000 Indianapolis, Indiana,
National Benevolent
Association - Robin Run
Village, 7.625%, 10/1/22 10,741,200
NR NR 3,665 Lackawanna County,
Pennsylvania, IDA,
Edella Street
Associates,
8.875%, 9/1/14 3,962,708
NR NR 3,270 Luzerne County,
Pennsylvania, IDA,
River Street
Associates,
8.75%, 6/15/07 3,512,405
NR NR 6,250 Massachusetts HEFA,
Fairview Extended Care
Services, Inc.,
10.125%, 1/1/11 7,073,000
NR NR 13,250 Massachusetts IFA, AGE
Institute of
Massachusetts Project,
8.05%, 11/1/25 13,290,015
NR NR 11,790 Mississippi Finance
Corp., Magnolia
Healthcare, 7.99%, 7/1/25 11,656,773
NR NR 6,750 Missouri HEFA, Bethesda
Health Group of St.
Louis, Inc.,
6.625%, 8/15/05 6,702,480
NR NR 14,000 Missouri HEFA, Bethesda
Health Group of St.
Louis, Inc., 7.5%, 8/15/12 14,261,520
NR NR 12,500 Montgomery County,
Pennsylvania, IDA,
Advancement of Geriatric
Health Care Institute,
8.375%, 7/1/23 13,077,125
NR NR 5,000 New Jersey EDA, Claremont
Health System, Inc.,
9.1%, 9/1/22 5,297,100
NR NR 5,915 New Jersey EDA, Victoria
Health Corporation,
7.75%, 1/1/24 6,002,838
NR NR 3,110 Okaloosa County, Florida,
Beverly Enterprises-
Florida, Inc.,
10.75%, 10/1/03 3,307,889
NR NR 3,500 Philadelphia, Pennsylvania,
The Philadelphia Protestant
Home Project, 8.625%, 7/1/21 3,642,940
Baa1 BBB 4,630 Racine County, Wisconsin,
Health Center, 8.125%, 8/1/21 4,764,409
NR NR 5,000 Rhode Island Health and
Education Building,
Steere House,
8.25%, 7/1/15 5,271,600
NR NR 5,000 Sussex County, Delaware,
Delaware Health
Corporation, 7.6%, 1/1/24 4,967,250
NR NR 5,000 Sussex County, Delaware,
Delaware Health
Corporation, 7.5%, 1/1/14 4,972,400
NR NR 4,500 Tarrant County Health
Facilities, Texas, 3927
Foundation, Inc.,
10.25%, 9/1/19 4,681,575
NR NR 6,000 Westmoreland County,
Pennsylvania, IDA,
Highland Health System,
Inc., 9.25%, 6/1/22 6,364,920
NR NR 3,555 Wood County, West
Virginia, West Virginia
Rehabilitation Services,
Inc. (AMT), 9.5%, 12/1/15 3,678,821
--------------
$ 172,124,751
--------------
SOLID WASTE - 2.1%
Baa2 BBB+ $ 6,050 Carbon County, Utah,
Laidlaw (AMT), 7.5%, 2/1/10 $ 6,650,886
Ba NR 2,500 Mercer County, New
Jersey, Improvement
Authority (AMT), 0%, 4/1/14 672,275
Ba NR 5,000 Mercer County, New
Jersey, Improvement
Authority (AMT), 0%, 4/1/15 1,247,300
Ba NR 10,690 Mercer County, New
Jersey, Improvement
Authority (AMT), 0%, 4/1/16 2,473,880
NR NR 35,000 Robbins, Cook County,
Illinois, Robbins
Resource Recovery
Partners, L.P., 9.25%,
10/15/16 35,525,000
--------------
$ 46,569,341
--------------
SPECIAL ASSESSMENT - 0.9%
A BBB $ 8,000 Hoffman Estates,
Illinois, Economic
Development Project
Area, 0%, 5/15/05 $ 4,914,400
A BBB 11,000 Hoffman Estates,
Illinois, Economic
Development Project
Area, 0%, 5/15/06 6,326,760
A BBB 17,460 Hoffman Estates,
Illinois, Economic
Development Project
Area, 0%, 5/15/07 9,384,051
--------------
$ 20,625,211
--------------
TAX ALLOCATION - 0.2%
Baa BBB $ 3,815 Inglewood, California
Public Financing
Authority, In-Town,
Manchester-Prairie and
North Inglewood
Industrial Park
Redevelopment Projects-
Redevelopment Loans,
7%, 5/1/22 $ 4,043,327
--------------
TRANSPORTATION - 15.6%
Baa2 BB+ $ 28,000 Chicago, Illinois, O'Hare
International, American
Airlines (AMT),
7.875%, 11/1/25 $ 30,143,120
Baa2 BB+ 20,275 Chicago, Illinois, O'Hare
International, American
Airlines, 8.2%, 12/1/24 23,563,402
Baa2 BB+ 41,000 Dallas-Fort Worth, Texas,
International Airport
Facility, American
Airlines (AMT), 7.25%,
11/1/30 43,667,460
Baa BBB 8,000 Denver, Colorado, Airport
System Revenue (AMT),
7%, 11/15/25 8,293,840
Baa BBB 7,800 Denver, Colorado, Airport
System Revenue (AMT),
8%, 11/15/17 8,247,096
Baa BBB 5,725 Denver, Colorado, Airport
System Revenue (AMT),
7.5%, 11/15/23 6,263,265
Baa3 BB 95,500 Denver, Colorado, United
Airlines (AMT), 6.875%,
10/1/32 (3) 97,883,680
A A 5,000 Hawaii Airport System
(AMT), 7%, 7/1/18 5,350,800
NR NR 2,100 Los Angeles International
Airport, Continental
Airlines (AMT),
9%, 8/1/08 2,257,059
NR NR 4,425 Los Angeles International
Airport, Continental
Airlines (AMT),
9%, 8/1/17 4,671,650
NR BBB 2,150 New York State Thruway
Authority, Cross-
Westchester Expressway,
0%, 1/1/03 1,509,042
NR BBB 2,940 New York State Thruway
Authority, Cross-
Westchester Expressway,
0%, 1/1/04 1,953,013
NR BBB 2,905 New York State Thruway
Authority, Cross-
Westchester Expressway,
0%, 1/1/06 1,693,208
A1 AA 15,000 Port Authority of New
York and New Jersey
(AMT), Variable Rate,
1/15/27 (1) 15,519,600
A1 AA 5,000 Port of Seattle,
Washington (AMT), 6%,
12/1/14 5,000,400
NR NR 35,100 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/17 9,684,792
NR NR 54,400 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/18 14,085,247
NR NR 20,000 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/19 4,838,600
NR NR 46,210 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/20 10,465,178
NR NR 72,685 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/21 15,442,655
NR NR 29,225 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/22 5,824,835
NR NR 45,045 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/23 8,358,550
NR NR 108,260 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/24 18,840,488
NR NR 15,000 San Joaquin Hills,
California, Toll Roads,
0%, 1/1/25 2,370,300
--------------
$ 345,927,280
--------------
UTILITY REVENUE BONDS - 1.3%
Baa2 BBB+ $ 10,000 Brazos River Authority,
Texas, PCR, Texas
Utilities Electric
Company, 9.25%, 3/1/18 $ 10,763,300
Aa A+ 5,000 Intermountain Power
Agency, Utah, Variable
Rate, 7/1/11 (1) 4,656,250
Aa AA- 10,000 Los Angeles, California,
Department of Water &
Power, 5%, 10/15/33 8,644,600
NR NR 5,000 West Feliciana,
Louisiana, PCR,Gulf
States Utilities
Company Project (AMT),
9%, 5/1/15 5,585,850
--------------
$ 29,650,000
--------------
WATER & SEWER - 0.5%
A A- $ 10,000 New York City Municipal
Water Finance
Authority, 6.25%, 6/15/21 $ 10,159,400
--------------
TOTAL TAX-EXEMPT
INVESTMENTS
(identified cost,
$2,052,805,053) $2,215,261,447
--------------
- ------------------------------------------------------------------------------
TAXABLE INVESTMENTS
- ------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
STANDARD AMOUNT
MOODY'S & POOR'S (000 OMITTED) SECURITY VALUE
- ------------------------------------------------------------------------------
TAXABLE INVESTMENT - 0.04%
NR NR $ 800 Ridgeland, Mississippi,
Urban Renewal, The
Orchard Limited Project,
Series 1993B, 9%, 12/1/00
(identified cost, $800,000) $ 806,400
--------------
TOTAL INVESTMENTS
(identified cost,
$2,053,605,053) $2,216,067,847
==============
(1) The above designated security has been issued as an inverse floater bond.
(2) When-issued security.
(3) Security has been segregated to cover margin requirements on open
financial futures contracts.
(4) Non-income producing security.
(5) The Portfolio is accruing only partial interest on this security.
At September 30, 1996, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments, is as
follows:
California -- 12.7%
Colorado -- 11.3%
Illinois -- 10.5%
Others, representing less than 10%
individually -- 65.5%
The Portfolio invests primarily in debt securities issued by municipalities.
The ability of the issuers of the debt securities to meet their obligations
may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at September 30, 1996, 17.3% of the securities in the portfolio
of investments are backed by bond insurance of various financial guaranty
assurance agencies. The aggregate percentage by financial institution ranges
from 1.5% to 9.1% of total investments.
Note: The classification of securities by industry sector set forth above is
unaudited.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
September 30, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$2,053,605,053) $2,216,067,847
Cash 169
Receivable for daily variation margin on open financial
futures contracts (Note 1E) 562,500
Receivable for investments sold 195,000
Interest receivable 40,701,405
Deferred organization expenses (Note 1D) 27,075
--------------
Total assets $2,257,553,996
LIABILITIES:
Payable for investments purchased $ 5,471,938
Payable for when issued securities (Note 1G) 30,400,000
Demand note payable 9,087,000
Payable to affiliate --
Trustees' fees 7,383
Accrued expenses 109,673
-----------
Total liabilities 45,075,994
--------------
NET ASSETS applicable to investors' interest in Portfolio $2,212,478,002
==============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $2,055,738,521
Unrealized appreciation of investments and
financial futures contracts (computed on
the basis of identified cost) 156,739,481
--------------
Total $2,212,478,002
==============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended September 30, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest income $161,799,128
Expenses --
Investment adviser fee (Note 2) $ 9,942,568
Compensation of Trustees not members of the Investment
Adviser's organization (Note 2) 29,186
Custodian fee (Note 1J) 394,918
Interest expense (Note 5) 618,203
Legal and accounting services 124,079
Amortization of organization expenses (Note 1D) 19,566
Miscellaneous 73,434
------------
Total expenses $ 11,201,954
Deduct reduction of custodian fee (Note 1J) 232,447
------------
Net expenses 10,969,507
------------
Net investment income $150,829,621
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (1,962,977)
Financial futures transactions 3,270,695
------------
Net realized gain on investments $ 1,307,718
Change in unrealized appreciation (depreciation) of --
Investments $ 27,088,213
Financial futures contracts (5,723,313)
------------
Net unrealized appreciation of investments 21,364,900
------------
Net realized and unrealized gain on investments $ 22,672,618
------------
Net increase in net assets from operations $173,502,239
============
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 150,829,621 $ 155,285,975
Net realized gain (loss) on investment
transactions 1,307,718 (86,966,435)
Change in unrealized appreciation of
investments 21,364,900 177,320,778
-------------- --------------
Net increase in net assets from
operations $ 173,502,239 $ 245,640,318
-------------- --------------
Capital transactions --
Contributions $ 517,368,709 $ 443,671,368
Withdrawals (739,039,309) (639,601,609)
-------------- --------------
Decrease in net assets resulting from
capital transactions $ (221,670,600) $ (195,930,241)
-------------- --------------
Net increase (decrease) in net
assets $ (48,168,361) $ 49,710,077
NET ASSETS:
At beginning of year 2,260,646,363 2,210,936,286
-------------- --------------
At end of year $2,212,478,002 $2,260,646,363
============== ==============
- ------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993*
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
RATIOS (as a percentage of average daily net assets):
Expenses (1) 0.49% 0.50% 0.50% 0.47%+
Expenses after custodian fee reduction 0.48% 0.49% -- --
Net investment income 6.65% 7.00% 6.55% 6.58%+
PORTFOLIO TURNOVER 19% 54% 40% 13%
NET ASSETS, at end of period (000 omitted) $2,212,478 $2,260,646 $2,210,936 $2,083,322
</TABLE>
+ Computed on an annualized basis.
* For the period from the start of business, February 1, 1993 to September
30, 1993.
(1) The expense ratios for the years ended September 30, 1996 and 1995 have
been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratio by
the effect of any expense offset arrangements with its service providers.
The expense ratios for each of the periods ended on or before September 30,
1994 have not been adjusted to reflect this change.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
National Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company which was organized as a trust under the laws of the State of New York
on May 1, 1992. The Declaration of Trust permits the Trustees to issue
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Municipal bonds are normally valued on the basis
of valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on commodity
exchanges are valued at closing settlement prices. Short-term obligations,
maturing in sixty days or less, are valued at amortized cost, which
approximates value. Investments for which valuations or market quotations are
unavailable are valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
B. INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C. INCOME TAXES -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors 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. Interest income received by the
Portfolio on investments in municipal bonds, which is excludable from gross
income under the Internal Revenue Code, will retain its status as income
exempt from Federal income tax when allocated to the Portfolio's investors.
The portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986, may be considered a tax preference item for investors.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F. LEGAL FEES -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that are
expected to result in the restructuring of or a plan of reorganization for an
investment are recorded as realized losses. Ongoing expenditures to protect or
enhance an investment are treated as operating expenses.
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Portfolio may
engage in when-issued or delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked-to-market daily and begin accruing interest on settlement date.
H. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
I. OTHER -- Investment transactions are accounted for on a trade date basis.
J. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Prior to November 10, 1995, IBT was an affiliate
of EVM. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balance the
Portfolio maintains with IBT. All significant credit balances used to reduce
the Portfolio's custodian fee are reflected as a reduction of operating
expense on the statements of operations.
- ------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets plus a percentage of
gross income (i.e., income other than gains from the sale of securities). For
the year ended September 30, 1996, the fee was equivalent to 0.44% of the
Portfolio's average net assets and amounted to $9,942,568. Except as to
Trustees of the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the Portfolio
out of such investment adviser fee. Trustees of the Portfolio that are not
affiliated with the Investment Adviser may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the year ended September 30, 1996, no
significant amounts have been deferred. Certain of the officers and Trustees
of the Portfolio are officers and directors/trustees of the above
organizations.
- ------------------------------------------------------------------------------
(3) INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $419,950,345 and $533,404,649, respectively,
for the year ended September 30, 1996.
- ------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at September 30, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $2,053,605,053
==============
Gross unrealized appreciation $ 177,997,440
Gross unrealized depreciation 15,534,646
--------------
Net unrealized appreciation $ 162,462,794
==============
- ------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank. The line
of credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at an amount above either the bank's adjusted certificate of
deposit rate, a variable adjusted certificate of deposit rate or a federal
funds effective rate. In addition, a fee computed at an annual rate of 1/4 of
1% on the $20 million committed facility and on the daily unused portion of
the $100 million discretionary facility is allocated among the participating
portfolios and funds at the end of each quarter. For the year ended September
30, 1996, the average daily loan balance was $9,009,481 and the average
interest rate was 6.86%. The maximum borrowings at any month end during the
year ended September 30, 1996 was $28,866,000. At September 30, 1996, the
Portfolio had a balance outstanding pursuant to this line of credit of
$9,087,000.
- ------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at September 30,
1996, is as follows:
FUTURES CONTRACTS NET UNREALIZED
EXPIRATION DATE CONTRACTS POSITION DEPRECIATION
--------------- --------- -------- --------------
12/96 2,000 U.S. Treasury Bonds Short $5,723,313
At September 30, 1996, the Portfolio had sufficient cash and/or securities
to cover margin requirements on open futures contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
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TO THE TRUSTEES AND INVESTORS OF
NATIONAL MUNICIPALS PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of National Municipals Portfolio as of
September 30, 1996, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended September
30, 1996 and 1995 and the supplementary data for the years ended September 30,
1996, 1995 and 1994, and for the period from the start of business, February
1, 1993, to September 30, 1993. These financial statements and supplementary
data are the responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements and supplementary data
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at September 30, 1996 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of National
Municipals Portfolio at September 30, 1996, the results of its operations, the
changes in its net assets, and its supplementary data for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
NOVEMBER 1, 1996
<PAGE>
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INVESTMENT MANAGEMENT
EV TRADITIONAL OFFICERS INDEPENDENT TRUSTEES
NATIONAL
MUNICIPALS FUND THOMAS J. FETTER DONALD R. DWIGHT
24 Federal Street President President, Dwight
Boston, MA 02110 Partners, Inc.
JAMES B. HAWKES Chairman, Newspapers
Vice President, of New England, Inc.
Trustee
SAMUEL L. HAYES, III
ROBERT B. MACINTOSH Jacob H. Schiff
Vice President Professor of
Investment Banking,
JAMES L. O'CONNOR Harvard University Graduate
Treasurer School of Business
Administration
THOMAS OTIS
Secretary NORTON H. REAMER
President and Director,
United Asset Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser
and Consultant
-------------------------------------------
NATIONAL OFFICERS
MUNICIPALS INDEPENDENT TRUSTEES
PORTFOLIO THOMAS J. FETTER
24 Federal Street President DONALD R. DWIGHT
Boston, MA 02110 President, Dwight
JAMES B. HAWKES Partners, Inc.
Vice President, Chairman, Newspapers
Trustee of New England, Inc.
ROBERT B. MACINTOSH SAMUEL L. HAYES, III
Vice President Jacob H. Schiff
Professor of
THOMAS M. METZOLD Investment Banking,
Vice President Harvard University Graduate
and Portfolio Manager School of Business
Administration
JAMES L. O'CONNOR
Treasurer NORTON H. REAMER
President and Director,
THOMAS OTIS United Asset Management Corporation
Secretary
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser
and Consultant
