<PAGE> 1
EATON VANCE MUNICIPALS TRUST
FOR THE FUNDS:
* EV Marathon Alabama Municipals Fund
* EV Marathon Arkansas Municipals Fund
* EV Marathon Georgia Municipals Fund
* EV Marathon Kentucky Municipals Fund
* EV Marathon Louisiana Municipals Fund
* EV Marathon Maryland Municipals Fund
* EV Marathon Missouri Municipals Fund
* EV Marathon North Carolina Municipals Fund
* EV Marathon Oregon Municipals Fund
* EV Marathon South Carolina Municipals Fund
* EV Marathon Tennessee Municipals Fund
* EV Marathon Virginia Municipals Fund
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[EATON VANCE ARCH WINDOW LOGO]
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Annual Shareholder Report
August 31, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
President's letter to shareholders.................................. 3
Year-end results, listed by state................................... 4
Management Reports:
EV Marathon Alabama Municipals Fund......................... 5
EV Marathon Arkansas Municipals Fund........................ 6
EV Marathon Georgia Municipals Fund......................... 7
EV Marathon Kentucky Municipals Fund........................ 8
EV Marathon Louisiana Municipals Fund....................... 9
EV Marathon Maryland Municipals Fund........................ 10
EV Marathon Missouri Municipals Fund........................ 11
EV Marathon North Carolina Municipals Fund.................. 12
EV Marathon Oregon Municipals Fund.......................... 13
EV Marathon South Carolina Municipals Fund.................. 14
EV Marathon Tennessee Municipals Fund....................... 15
EV Marathon Virginia Municipals Fund........................ 16
Financial Results........................................... 17
</TABLE>
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.
2
<PAGE> 3
To Shareholders
Following an upbeat year in 1995, the bond market encountered difficulty in the
first half of 1996, as the investment climate changed dramatically.
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%. Investors' optimism was
short-lived, however, as Fed Chairman Alan Greenspan suggested in his Spring
Congressional testimony that, in light of current economic growth, the next move
in rates would likely be higher. Subsequent employment data showed that job
creation was exceeding market estimates, and that the labor market was indeed
tightening.
While job growth has cooled in recent months from the blistering pace set early
in the year, the economy has nonetheless failed to give a clear indication of
its long-term direction. Accordingly, the Federal Reserve has effectively put
its monetary policy on hold, while maintaining a bias toward higher rates.
Despite the uncertainty in the market, there are several reasons we believe an
investment in municipal bonds continues to represent good value for
tax-conscious investors. 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. Interestingly, recent indicators,
including the Federal Reserve's "beige book," an anecdotal regional economic
survey, suggest a possible slowdown in the second half of the year. Most
importantly, by most measures, inflation remains well under control.
Second, whatever the outcome of the various tax cut proposals that have marked
the campaign 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.
- --------------------------------------------------------------------------------
TAX-EXEMPT BONDS YIELD 85%
OF TREASURY YIELDS
<TABLE>
<S> <C>
5.89% 9.20%
30-YR. AAA GENERAL TAXABLE EQUIVALENT YIELD OF
OBLIGATION (GO) BONDS* INVESTMENT FOR COUPLE IN
36% TAX BRACKET
6.94%
30-YEAR TREASURY BONDS
</TABLE>
Principal and interest payments of Treasury securities are guaranteed by
the U.S. government.
*GO yield is a compilation of a representative variety of general obligation
bonds and is not necessarily represented by the Fund's yield. Statistics as of
July 31, 1996.
Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
- ------------------------------------------------------------------------------
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 believe that, despite the occasional market fluctuations, a
steadfast, long-term outlook is the best way to reap the advantages of tax-free
investing.
Sincerely
[BOX FOR PHOTO]
/s/ Thomas J. Fetter
-------------------------
Thomas J. Fetter
President
October 8, 1996
- -----------------------------------------------------------------------------
Included in the pages that follow are performance charts that compare 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 your Fund and the unmanaged Lehman Brothers Municipal Bond Index.
The solid line on the chart represents the Fund's performance. The Fund's total
return figure reflects fund expenses and portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions. The
contingent deferred sales charge, which the charts refer to, is deducted at
redemption as follows: 5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2%
- - 5th year; and 1% - 6th year. The dotted line represents the performance of the
Lehman Brothers Municipal Bond Index, a broad-based, widely recognized unmanaged
index of municipal bonds. Whereas the Fund's portfolio is composed principally
of bonds solely from your individual state, the Index is composed of bonds from
all 50 states and many jurisdictions. 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 the Lehman Brothers Municipal Bond Index.
- --------------------------------------------------------------------------------
3
<PAGE> 4
INFORMATION ABOUT YOUR MUTUAL FUND INVESTMENT
<TABLE>
<CAPTION>
FINANCIAL DATA: TAX DATA:
---------------------------------------------- -----------------------------------------
RESULTS FOR THE Total If your The after-tax
YEAR-ENDED AUGUST return Dividends Fund's combined equivalent
31, 1996 (excl. paid by Fund NAV per distribution Federal & distribution
sales (during share at rate at state tax. rate you would Tax
charge) period) 8/31/96 8/31/96 rate is.. need is... Information*
- ----------------- ------ ------ -------- ------------ ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
EV Marathon 4.9% $0.480 $10.46 4.45% [GRAPHIC 39.20% 7.30% 99.48%
ALABAMA OF
Municipals Fund ALABAMA]
EV Marathon 4.1% $0.473 $10.19 4.42% [GRAPHIC 40.48% 7.40% 99.48%
ARKANSAS OF
Municipals Fund ARKANSAS]
EV Marathon 4.9% $0.455 $ 9.81 4.64% [GRAPHIC 39.84% 7.69% 99.24%
GEORGIA Municipals OF
Fund GEORGIA]
EV Marathon 4.5% $0.462 $ 9.97 4.51% [GRAPHIC 43.36% 7.95% 99.51%
KENTUCKY OF
Municipals Fund KENTUCKY]
EV Marathon 4.8% $0.490 $ 9.96 4.84% [GRAPHIC 39.84% 8.04% 99.73%
LOUISIANA OF
Municipals Fund LOUISIANA]
EV Marathon 5.4% $0.481 $10.30 4.49% [GRAPHIC 41.12% 7.59% 99.11%
MARYLAND OF
Municipals Fund MARYLAND]
EV Marathon 4.6% $0.479 $10.51 4.48% [GRAPHIC 39.84% 7.42% 98.95%
MISSOURI Municipals OF
Fund MISSOURI]
EV Marathon NORTH 4.8% $0.468 $ 9.97 4.61% [GRAPHIC 40.96% 7.77% 98.52%
CAROLINA OF NORTH
Municipals Fund CAROLINA]
EV Marathon 3.8% $0.460 $10.24 4.41% [GRAPHIC 41.76% 7.56% 99.45%
OREGON Municipals OF
Fund OREGON]
EV Marathon SOUTH 4.9% $0.467 $10.02 4.66% [GRAPHIC 40.48% 7.80% 99.09%
CAROLINA OF SOUTH
Municipals Fund CAROLINA]
EV Marathon 5.2% $0.477 $10.15 4.58% [GRAPHIC 39.84% 7.60% 99.40%
TENNESSEE OF
Municipals Fund TENNESSEE]
EV Marathon 4.7% $0.478 $10.26 4.54% [GRAPHIC 39.68% 7.49% 98.64%
VIRGINIA Municipals OF
Fund VIRGINIA]
</TABLE>
*Percentages represent the amounts of the total dividends paid by the Funds from
net investment income during the year ended August 31, 1996 that have been
designated as exempt-interest dividends. Tax legislation eliminated the
exception 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.
4
<PAGE> 5
EV MARATHON ALABAMA MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF MEDICAL SYMBOL]
Jasper, Alabama Hospital
Revenue Bonds - Walker
Regional Medical Center
Walker Regional Medical Center, a non-profit corporation, has grown
substantially since it began in 1957 with the purchase of Community Hospital, a
44-bed hospital. Additional beds were added in 1965, and in 1978 Walker Medical
Center began construction of a new 227-bed hospital. As the largest hospital in
Walker County, the facility has become very important to the local community.
These Series 1993 bonds are important for the improvement, enlargement, and
maintainance of this vital facility.
[PICTURE OF ALABAMA]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues...................................... 70
Average quality....................................... AA-
Investment grade...................................... 97.5
Effective maturity.................................... 14.88 yrs.
Largest sectors:
Insured water & sewer.............................. 21.0%*
Hospitals.......................................... 14.0
Industrial development revenue..................... 12.9
Insured electric utilities......................... 8.8*
Insured education.................................. 8.7*
Insured general obligations........................ 8.2*
* Private insurance does not remove the market risks that are associated with
these investments.
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THE STATE OF THE STATE: Alabama
The Alabama economy has been in transition since the mid-1980s. For many years,
the state relied on the textile, apparel, and food processing industries to fuel
its economy. As those industries met with intense competition overseas, Alabama
has diversified towards services, trade and finance. Moreover, in recent years,
Alabama has successfully courted new manufacturers through aggressive economic
incentive programs. According to Standard & Poor's, Briggs & Stratton Co.,
British Steel, Inc., Martin Marietta, and Mercedes Benz, U.S. International,
Inc. have made capital investments of close to $9 billion in Alabama since 1993.
The economic stimulus from this investment - along with the increasing economic
diversity - has been tempered, however, by the loss of jobs in lower wage
industries. In fact, personal income in Alabama is still behind the regional and
national averages.
Fortunately for Alabamans, their state government is well managed financially.
Spending growth remains low, due to a constitutional prohibition on deficit
spending, and zero growth is projected for fiscal 1997. As a result, the state's
General Obligation debt has a solid AA rating by Standard & Poor's.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Alabama Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From May 31, 1992, through August 31, 1996
EV MARATHON ALABAMA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
5/31/92+ $10,000 NA $10,000
6/30/92 $10,225 NA $10,168
7/31/92 $10,685 NA $10,473
8/31/92 $10,438 NA $10,370
9/30/92 $10,476 NA $10,438
10/31/92 $10,231 NA $10,336
11/30/92 $10,571 NA $10,521
12/31/92 $10,702 NA $10,628
1/31/93 $10,806 NA $10,752
2/28/93 $11,255 NA $11,141
3/31/93 $11,094 NA $11,023
4/30/93 $11,229 NA $11,134
5/31/93 $11,294 NA $11,197
6/30/93 $11,469 NA $11,384
7/31/93 $11,466 NA $11,398
8/31/93 $11,722 NA $11,636
9/30/93 $11,847 NA $11,769
10/31/93 $11,875 NA $11,791
11/30/93 $11,733 NA $11,687
12/31/93 $12,032 NA $11,934
1/31/94 $12,152 NA $12,070
2/28/94 $11,806 NA $11,758
3/31/94 $11,150 NA $11,279
4/30/94 $11,223 NA $11,374
5/31/94 $11,330 NA $11,473
6/30/94 $11,212 NA $11,406
7/31/94 $11,474 NA $11,612
8/31/94 $11,470 NA $11,652
9/30/94 $11,263 NA $11,481
10/31/94 $10,977 NA $11,277
11/30/94 $10,709 NA $11,073
12/31/94 $11,061 NA $11.317
1/31/95 $11,476 NA $11,641
2/28/95 $11,854 NA $11,979
3/31/95 $11,954 NA $12,117
4/30/95 $11,945 NA $12,131
5/31/95 $12,301 NA $12,518
6/30/95 $12,092 NA $12,409
7/31/95 $12,176 NA $12,526
8/31/95 $12,317 NA $12,685
9/30/95 $12,353 NA $12,765
10/31/95 $12,591 NA $12,951
11/30/95 $12,830 NA $13,166
12/31/95 $12,961 NA $13,292
1/31/96 $13,035 NA $13,393
2/28/96 $12,891 NA $13,302
3/31/96 $12,696 NA $13,132
4/30/96 $12,686 NA $13,095
5/31/96 $12,697 NA $13,090
6/30/96 $12,822 NA $13,233
7/31/96 $12,928 NA $13,353
8/31/96 $12,914 $12,714 $13,350
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.2% 5.9%
- ---------------------------------------------------------
Without CDSC 4.9% 6.3%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 5/1/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF TIMOTHY T. BROWSE]
"Approximately 50% of Alabama's municipal bonds are insured, which means that
credit quality is generally very good. The high percentage of insured bonds also
leads to higher turnover ratio in the portfolio, as I look to maximize
shareholder value by realizing the gains of individual issues whenever possible.
I have been selling bonds in which the call period has shortened, and am always
on the lookout for non-rated bonds, which are higher-yielding but are not
necessarily less creditworthy. Industrial development bonds also provide an
excellent opportunity to increase yield without taking on additional risk. Our
research staff is vital to the success of this effort."
- Timothy T. Browse
5
<PAGE> 6
EV MARATHON ARKANSAS MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF A HOUSE]
University of Arkansas
Housing System
These bonds support the housing system at the University of Arkansas.
Specifically, the revenue helps finance "current expenses," including operating
expenses, maintenance, upkeep and repairs, food services, and insurance.
In addition, proceeds help finance various construction and renovation projects
which includes architectural fees, legal fees, and other related expenses.
[GRAPHIC OF ARKANSAS]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues...................................... 65
Average quality....................................... A+
Investment grade...................................... 94.6%
Effective maturity.................................... 14.34 yrs.
Largest sectors:
Industrial development revenue..................... 15.4%
Hospitals.......................................... 15.2
Housing............................................ 11.2
Electric utilities................................. 9.6
Water & sewer...................................... 8.8
Insured electric Utilities......................... 7.5*
* Private insurance does not remove the market risks that are associated with
these investments.
THE STATE OF THE STATE: Arkansas
The Arkansas economy is well-diversified and has been characterized in recent
years by steady growth, declining unemployment, and an expanding manufacturing
base. The conservative fiscal policies of the state government have provided a
healthy environment for economic growth.
The largest employment sector, manufacturing, comprises 25% of the state's
economy, according to Standard & Poor's. Within this sector, food processing has
been the primary stimulus for growth. Tyson Foods, Inc. - one of four large
poultry-producing firms in Arkansas - employs 18,562 persons across the state.
Other significant sectors include wholesale and retail trade, comprising 23% of
state employment, and construction, the fastest-growing sector due to a
significant population increase. Leading the way for the wholesale and retail
trade sector is Wal-Mart Stores, Inc., with 26,000 employees statewide.
Employment has declined in the capital goods, heating and cooling equipment, and
defense-related industries. These job losses should be replaced, however, by
gains in the expanding service sector, which is the projected leading driver of
growth over the next several years.
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Arkansas Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From October 31, 1992, through August 31, 1996
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
10/31/92+ $10,000 NA $10,000
11/30/92 $10,331 NA $10,179
12/31/92 $10,482 NA $10,283
1/31/93 $10,648 NA $10,403
2/28/93 $11,130 NA $10,779
3/31/93 $11,008 NA $10,665
4/30/93 $11,124 NA $10,773
5/31/93 $11,199 NA $10,833
6/30/93 $11,387 NA $11,014
7/31/93 $11,396 NA $11,028
8/31/93 $11,633 NA $11,258
9/30/93 $11,770 NA $11,386
10/31/93 $11,766 NA $11,408
11/30/93 $11,645 NA $11,308
12/31/93 $11,925 NA $11,546
1/31/94 $12,078 NA $11,678
2/28/94 $11,730 NA $11,376
3/3l/94 $11,035 NA $10,913
4/30/94 $11,162 NA $11,005
5/31/94 $11,291 NA $11,100
6/30/94 $11,181 NA $11,036
7/31/94 $11,433 NA $11,235
8/31/94 $11,472 NA $11,274
9/30/94 $11,262 NA $11,108
10/31/94 $10,950 NA $10,911
11/30/94 $10,610 NA $10,714
12/31/94 $10,930 NA $10,950
1/31/95 $11,324 NA $11,263
2/28/95 $11,716 NA $11,590
3/31/95 $11,816 NA $11,723
4/30/95 $11,806 NA $11,737
5/31/35 $12,141 NA $12,112
6/30/95 $11,942 NA $12,006
7/31/95 $12,038 NA $12,119
8/31/95 $12,179 NA $12,273
9/30/95 $12,263 NA $12,351
10/31/95 $12,478 NA $12,530
11/30/95 $12,717 NA $12,739
12/31/95 $12,862 NA $12,861
1/31/96 $12,911 NA $12,958
2/28/96 $12,754 NA $12,870
3/31/96 $12,545 NA $12,706
4/30/96 $12,509 NA $12,670
5/31/96 $12,484 NA $12,665
6/30/96 $12,596 NA $12,803
7/31/96 $12,700 NA $12,919
8/31/96 $12,673 $12,373 $12,916
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.9% 4.9%
- ---------------------------------------------------------
Without CDSC 4.1% 5.6%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 10/2/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF TIMOTHY T. BROWSE]
"In Arkansas, as in many states, there is little new issuance. As a result,
there is currently low turnover in the portfolio due to lack of attractive
alternatives. I take every opportunity I can find to broaden and diversify the
portfolio.
I have been selling bonds in which the call period has shortened, and am always
on the lookout for non-rated bonds, which are higher-yielding but are not
necessarily less creditworthy. Industrial development bonds also provide an
excellent opportunity to add yield without taking on additional risk. Our
research staff is vital to the success of this effort."
- Timothy T. Browse
6
<PAGE> 7
EV MARATHON GEORGIA MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF MEDICAL SYMBOL]
Glynn-Brunswick
Memorial Hospital - S.E.
Georgia Health Systems Project
These bonds will help modernize the Southeast Georgia Regional Medical Center.
Specifically the plans call for construction of a six-story patient care tower
for surgery, imaging, cardiology, and cardiac rehabilitation services. In
addition, the new facility will include 88 private patient rooms and an
education center.
Construction, which began in the spring of 1996, is scheduled for completion in
the summer of 1998. The bonds, which are not callable until 2008, will finance
approximately 80% of the facility's total cost.
[PICTURE OF GEORGIA]
PORTFOLIO OVERVIEW
<TABLE>
<S> <C>
Based on market value as of August 31, 1996
Number of issues....................................... 73
Average quality........................................ AA-
Investment grade....................................... 95.1%
Effective maturity..................................... 15.65 yrs.
Largest sectors:
Insured hospitals................................... 15.7%*
Utilities........................................... 15.6
General obligation.................................. 13.3
Hospitals........................................... 11.8
Housing............................................. 10.8
</TABLE>
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Georgia
After remarkably strong growth in the 1980s, Georgia's economy plunged into a
difficult recessionary period, but has returned in the past few years to a
healthy, vibrant condition. Total revenues in 1996 exceed those of 1995 by 6.1%,
and employment is expected to rise by 2.3% this year. This ranks Georgia among
the highest in the nation for job growth. Furthermore, forecasters expect
employment to increase 2-3% per year through the end of the decade - also well
ahead of many other regions in the U.S.
These growth figures, while impressive, pale in comparison to the period from
1980 to 1990. During this decade, the population soared, personal income rose
146%, and total employment increased by 36%. The largest gains occurred in the
trade, financial, and construction sectors, which remain the strongest sectors
today.
The economic recovery since the recession of 1991-1992 has been strong and
consistent, and sound financial management by the state government has led to
excellent General Obligation Bond ratings (AA+ by Standard & Poor's). In
addition, debt levels remain moderate, with increased issuance supported by
corresponding increases in population and personal income.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Georgia Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From December 31, 1991, through August 31, 1996
EV MARATHON GEORGIA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
12/31/91+ $10,000 NA $10,000
1/31/92 $9,880 NA $10,023
2/29/92 $9,908 NA $10,026
3/31/92 $9,886 NA $10,030
4/30/92 $9,968 NA $10,119
5/31/92 $10,154 NA $10,238
6/30/92 $10,374 NA $10,410
7/31/92 $10,799 NA $10,722
8/31/92 $10,587 NA $10,618
9/30/92 $10,585 NA $10,687
10/31/92 $10,281 NA $10,582
11/30/92 $10,622 NA $10,772
12/31/92 $10,751 NA $10,882
1/31/93 $10,859 NA $11,008
2/28/93 $11,366 NA $11,406
3/31/93 $11,155 NA $11,286
4/30/93 $11,306 NA $11,399
5/31/93 $11,361 NA $11,463
6/30/93 $11,553 NA $11,655
7/31/94 $11,505 NA $11,670
8/31/93 $11,780 NA $11,913
9/30/93 $11,919 NA $12,049
10/31/93 $11,913 NA $12,072
11/30/93 $11,786 NA $11,966
12/31/93 $12,054 NA $12,218
1/31/94 $12,187 NA $12,358
2/28/94 $11,837 NA $12,038
3/31/94 $11,198 NA $11,547
4/30/94 $11,259 NA $11,646
5/31/94 $11,309 NA $11,746
6/30/94 $11,194 NA $11,678
7/31/94 $11,417 NA $11,889
8/31/94 $11,433 NA $11,930
9/30/94 $11,237 NA $11,755
10/31/94 $10,937 NA $11,546
11/30/94 $10,608 NA $11,337
12/31/94 $10,901 NA $11,587
1/31/95 $11,269 NA $11,918
2/28/95 $11,612 NA $12,265
3/31/95 $11,726 NA $12,406
4/30/95 $11,703 NA $12,420
5/31/95 $11,998 NA $12,816
6/30/95 $11,802 NA $12,704
7/31/95 $11,838 NA $12,825
8/31/95 $11,993 NA $12,987
9/30/95 $12,089 NA $13,069
10/31/95 $12,309 NA $13,259
11/30/95 $12,553 NA $13,480
12/31/95 $12,687 NA $13,609
1/31/96 $12,748 NA $13,712
2/28/96 $12,595 NA $13,619
3/31/96 $12,390 NA $13,445
4/30/96 $12,351 NA $13,407
5/31/96 $12,347 NA $13,402
6/30/96 $12,476 NA $13,548
7/31/96 $12,584 NA $13,671
8/31/96 $12,582 $12,386 $13,668
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.1% 4.7%
- ---------------------------------------------------------
Without CDSC 4.9% 5.0%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 12/23/91. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF CYNTHIA J. CLEMSON]
"In the Georgia Municipals Fund, as in many state funds, I have been selling
bonds in which the call period has shortened and replacing them with bonds that
have longer call periods. I am also always on the lookout for non-rated bonds,
which are higher-yielding but are not necessarily less creditworthy. Industrial
development bonds provide an excellent opportunity to add yield without taking
on additional risk. Our research staff has become more and more important in
helping us locate these opportunities.
I have been buying premium and discount bonds, and staying away from current
coupon bonds. This 'barbell' approach helps to maintain good upside potential
while limiting downside volatility."
- Cynthia J. Clemson
7
<PAGE> 8
EV MARATHON KENTUCKY MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF HARDHAT WORKER]
Perry, Kentucky Solid Waste
Disposal Revenue Bonds
The County of Perry, Kentucky has entered into a contract with T.J.
International, Inc. to finance a production facility for solid waste disposal.
The project will handle the sewage and solid waste from a lumber facility in
Perry County.
The Fund invested in these bonds recently, and they represent an excellent
example of how municipal financing for a private company can bring jobs into the
state.
[PICTURE OF KENTUCKY]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
<TABLE>
<S> <C>
Number of issues....................................... 84
Average quality........................................ A+
Investment grade....................................... 93.8
Effective maturity..................................... 13.51 yrs.
Largest sectors:
Industrial development revenue...................... 19.7%
Lease revenue bonds................................. 19.7
Insured hospitals................................... 11.6*
Utilities........................................... 8.5
Insured water & sewer............................... 6.7
Transportation...................................... 6.7
</TABLE>
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Kentucky
Kentucky's economy is very healthy, with strength in the manufacturing and
construction sectors, and respectable growth in the service and trade sectors.
The overall economy in Kentucky is expected to grow at a slightly higher rate
than that of the U.S. - primarily because of the growth in manufacturing and
construction - according to the Center for Business and Economic Research at the
University of Kentucky. The CBER estimates that between 1996 and 1998, almost
half (43.8%) of Kentucky's growth will come from manufacturing and other
goods-producing industries. Even in years when the manufacturing sector has
slowed nationwide, such as in 1994 and 1995, the sector's annual growth rate in
Kentucky was still more than double that of the U.S. in both years.
Kentucky's service and trade sectors are also healthy, and are expected to
contribute 14.5% and 16.7% of the state's growth, respectively, between 1996 and
1998.
Because of its vibrant economy, many people are moving to Kentucky. This net
population inflow, along with a natural population increase, should only help
stimulate future growth.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Kentucky Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From December 31, 1991, through August 31, 1996
EV MARATHON KENTUCKY MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
12/31/91+ $10,000 NA $10,000
1/31/92 $9,840 NA $10,023
2/29/92 $9,919 NA $10,026
3/31/92 $9,863 NA $10,030
4/30/92 $9,976 NA $10,119
5/31/92 $10,160 NA $10,238
6/30/92 $10,359 NA $10,410
7/31/92 $10,761 NA $10,722
8/31/92 $10,527 NA $10,618
9/30/92 $10,545 NA $10,687
10/31/92 $10,261 NA $10,582
11/30/92 $10,611 NA $10,772
12/31/92 $10,726 NA $10,882
1/31/93 $10,843 NA $11,008
2/28/93 $11,328 NA $11,406
3/31/93 $11,150 NA $11,286
4/30/93 $11,300 NA $11,399
5/31/93 $11,377 NA $11,463
6/30/93 $11,589 NA $11,655
7/31/93 $11,563 NA $11,670
8/31/93 $11,782 NA $11,913
9/30/93 $11,921 NA $12,049
10/31/93 $11,938 NA $12,072
11/30/93 $11,802 NA $11,966
12/31/93 $12,080 NA $12,218
1/31/94 $12,203 NA $12,358
2/28/94 $11,832 NA $12,038
3/31/94 $11,172 NA $11,547
4/30/94 $11,246 NA $11,646
5/3l/94 $11,343 NA $11,746
6/30/94 $11,207 NA $11,678
7/31/94 $11,454 NA $11,889
8/31/94 $11,471 NA $11,930
9/30/94 $11,231 NA $11,755
10/31/94 $10,921 NA $11,546
11/30/94 $10,64l NA $11,337
12/31/94 $10,958 NA $11,587
1/31/95 $11,387 NA $11,918
2/28/95 $11,756 NA $12,265
3/31/95 $11,858 NA $12,406
4/30/95 $11,849 NA $12,420
5/31/95 $12,218 NA $12,816
6/30/95 $11,999 NA $12,704
7/31/95 $12,073 NA $12,825
8/31/95 $12,229 NA $12,987
9/30/95 $12,302 NA $13,069
10/31/95 $12,535 NA $13,259
11/30/95 $12,792 NA $13,480
12/31/95 $12,927 NA $13,609
1/31/96 $12,976 NA $13,712
2/28/96 $12,812 NA $13,619
3/31/96 $12,646 NA $13,445
4/30/96 $12,608 NA $13,407
5/31/96 $12,605 NA $13,402
6/30/96 $12,746 NA $13,548
7/31/96 $12,815 NA $13,671
8/31/96 $12,774 $12,575 $13,668
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.5% 5.0%
- ---------------------------------------------------------
Without CDSC 4.5% 5.4%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 12/23/91. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF DAVID C. REILLY]
"Kentucky has a very good track record for attracting business. Whereas some
states have had to give too much away in tax incentives, Kentucky has been
careful to avoid that. This added investment in the state has improved
employment and the overall economy.
Our research staff is adept at finding good credit quality in non-rated
holdings. This gives us higher-yielding securities without necessarily adding
significant risk. We are also enhancing the performance characteristics of the
Fund by investing in premium and discount bonds and staying away from current
coupon bonds. This helps to maintain good upside potential while limiting
downside volatility."
- David C. Reilly
8
<PAGE> 9
EV MARATHON LOUISIANA MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF A HOUSE]
Louisiana Health Facilities
Revenue Bonds - Glen
Retirement System Project
The proceeds from this bond issue have been used to fund projects for the Glen
Retirement System, a non-profit corporation. The projects include acquisition
and construction of a new 59-unit independent living facility in Bossier City,
Louisiana, and the renovation and improvement of a nursing facility in
Shreveport, Louisiana.
The proceeds have also been used to retire two commercial bank loans, as well as
other debts incurred by the Glen Retirement System.
[GRAPHIC OF LOUISIANA]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues....................................... 47
Average quality........................................ AA-
Investment grade....................................... 97.2%
Effective maturity..................................... 18.00 yrs.
Largest sectors:
Housing............................................. 29.9%
Industrial development revenue...................... 11.6
Hospitals........................................... 10.2
Assisted living..................................... 9.3
Insured special tax................................. 8.3*
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Louisiana
Louisiana's economy has been based historically on the cyclical oil and natural
gas industries and related petro-chemical products. As jobs have declined in
this sector, service industries have filled the void and now represent the
largest sector in the economy, employing 25% of all workers. Economic growth in
Louisiana is constrained, however, by low personal income levels and an
over-dependence on cyclical industries.
Financially, budgetary problems in the state government account for the
relatively low bond ratings, assigned by the Standard & Poor's and Moody's
rating services, for the state's General Obligation debt. The most significant
problem is a large decrease in federal Medicaid funding. Other factors include
$1 billion in claims on the state from various sources, and difficulty matching
a fluctuating revenue stream - which is derived largely from a broad-based sales
tax - to planned expenditures.
Fortunately, Louisiana does have solutions to its financial dilemmas. In April,
the federal government approved $2.6 billion in Medicaid funding for the next
two years, and several sources of one-time revenues are earmarked for the
backlog of claims against the state. For the long term, a newly elected
administration has committed itself to fiscal reform and a balanced budget.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Louisiana Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From October 31, 1992, through August 31, 1996
EV MARATHON LOUISIANA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
10/31/92+ $10,000 NA $10,000
11/30/92 $10,439 NA $10,179
12/31/92 $10,601 NA $10,283
1/31/93 $10,778 NA $10,403
2/28/93 $11,303 NA $10,779
3/31/93 $11,160 NA $10,665
4/30/93 $11,307 NA $10,773
5/31/93 $11,382 NA $10,833
6/30/93 $11,613 NA $11,014
7/31/93 $11,578 NA $11,028
8/31/93 $11,881 NA $11,258
9/30/93 $12,051 NA $11,386
10/31/93 $12,047 NA $11,408
11/30/93 $11,905 NA $11,308
12/31/93 $12,219 NA $11,546
1/31/94 $12,364 NA $11,678
2/28/94 $11,912 NA $11,376
3/31/94 $11,165 NA $10,913
4/30/94 $11,264 NA $11,005
5/31/94 $11,409 NA $11,100
6/30/94 $11,267 NA $11,036
7/31/94 $11,514 NA $11,235
8/31/94 $11,501 NA $11,274
9/30/94 $11,268 NA $11,108
10/31/94 $10,954 NA $10,911
11/30/94 $10,647 NA $10,714
12/31/94 $10,963 NA $10,950
1/31/95 $11,378 NA $11,263
2/28/95 $11,767 NA $11,590
3/31/95 $11,848 NA $11,723
4/30/95 $11,817 NA $11,737
5/31/95 $12,065 NA $12,112
6/30/95 $11,864 NA $12,006
7/31/95 $11,952 NA $12,119
8/31/95 $12,085 NA $12,273
9/30/95 $12,172 NA $12,351
10/31/95 $12,393 NA $12,530
11/30/95 $12,613 NA $12,739
12/31/95 $12,762 NA $12,861
1/31/96 $12,777 NA $12,958
2/28/36 $12,580 NA $12,870
3/31/96 $12,393 NA $12,706
4/30/96 $12,395 NA $12,670
5/31/96 $12,446 NA $12,665
6/30/96 $12,564 NA $12,803
7/31/96 $12,686 NA $12,919
8/31/96 $12,661 $12,361 $12,916
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.2% 4.8%
- ---------------------------------------------------------
Without CDSC 4.8% 5.5%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 10/2/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF ROBERT B. MACINTOSH]
"Louisiana is heavily dependent on the oil and gas extraction industry, which is
cyclical. Also, state revenues come primarily from sales taxes, which can also
be erratic. Consequently, we do not own any Louisiana general obligation bonds.
They have attempted to create a gaming industry in New Orleans, but the results
of that effort are still unclear.
The portfolio tends to have a large number of lower-rated bonds, but there are
many good credits - such as paper industry industrial development bonds - in
which we have a great deal of confidence. As always, I manage for call
protection and hold on to good credits. "
- Robert B. MacIntosh
9
<PAGE> 10
EV MARATHON MARYLAND MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF MEDICAL SYMBOL]
Maryland Health and Higher
Education Facilities Authority -
Johns Hopkins Medical Institutions
These bonds have been issued to finance and refinance all of the parking
facilities of the Johns Hopkins Hospital. This hospital, a 1,025-bed facility in
Baltimore, is the largest hospital in the state and the primary teaching
hospital of the Johns Hopkins University School of Medicine.
The parking system provides parking for patients, visitors, employees,
physicians, students and others using both the hospital and the University. The
parking system operates four multi-level garages and three surface lots, for a
total of 6,355 spaces.
[GRAPHIC OF MARYLAND]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues...................................... 67
Average quality....................................... AA-
Investment grade...................................... 96.3%
Effective maturity.................................... 16.82 yrs.
Largest sectors:
Hospitals.......................................... 20.9%
Industrial development/pollution control........... 13.7
Insured water & sewer.............................. 8.6*
Housing............................................ 7.6
Electric utilities................................. 7.6
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Maryland
Maryland, relative to other states, is in an enviable economic position. Its
economy is well diversified, its residents earn high wages, on average, and its
finances are very well managed. Few should wonder, therefore, that Maryland's
General Obligation debt has earned Standard & Poor's highest rating, AAA.
Since Maryland is adjacent to Washington, D.C., almost 20% of its jobs are in
the government sector, which means that it will continue to be affected by
federal budget cuts. In addition, the manufacturing sector, although small at
approximately 8% of the economy, is experiencing job losses. These losses are
mitigated, however, by gains in the service sector, which commands over 30% of
the economy and is still growing.
Although growth has been slow in Maryland - and this is not expected to change -
the government's management of the state's finances is admirable. The state has
responded to its job losses by cutting spending, which has resulted in an
increase in the state's financial reserves. This type of astute planning has
enabled Maryland to borrow from the public sector when it needs to, and to pay
off its debt with a rapid amortization schedule.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Maryland Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From February 28, 1992, through August 31, 1996
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
2/29/92+ $10,000 NA $10,000
3/31/92 $9,999 NA $10,003
4/30/92 $10,098 NA $10,093
5/31/92 $10,238 NA $10,212
6/30/92 $10,432 NA $10,383
7/31/92 $10,871 NA $10,694
8/31/92 $10,648 NA $10,590
9/30/92 $10,676 NA $10,659
10/31/92 $10,320 NA $10,554
11/30/92 $10,665 NA $10,743
12/31/92 $10,830 NA $10,853
1/31/93 $10,987 NA $10,979
2/28/93 $11,434 NA $11,376
3/31/93 $11,277 NA $11,256
4/30/93 $11,425 NA $11,370
5/31/93 $11,500 NA $11,433
6/30/93 $11,721 NA $11,625
7/31/93 $11,674 NA $11,640
8/31/93 $11,946 NA $11,882
9/30/93 $12,128 NA $12,018
10/31/93 $12,134 NA $12,041
11/30/93 $11,966 NA $11,934
12/31/93 $12,258 NA $12,186
1/31/94 $12,402 NA $12,326
2/28/94 $12,003 NA $12,006
3/31/94 $11,252 NA $11,517
4/30/94 $11,281 NA $11,615
5/31/94 $11,401 NA $11,716
6/30/94 $11,279 NA $11,647
7/31/94 $11,535 NA $11,858
8/31/94 $11,576 NA $11,899
9/30/94 $11,328 NA $11,724
10/31/94 $11,011 NA $11,516
11/30/94 $10,678 NA $11,307
12/31/94 $11,049 NA $11,556
1/31/95 $11,449 NA $11,887
2/28/95 $11,894 NA $12,232
3/31/95 $12,007 NA $12,373
4/30/95 $11,974 NA $12,388
5/31/95 $12,361 NA $12,783
6/30/95 $12,087 NA $12,671
7/31/95 $12,184 NA $12,791
8/31/95 $12,352 NA $12,953
9/30/95 $12,426 NA $13,035
10/31/95 $12,682 NA $13,225
11/30/95 $12,963 NA $13,444
12/31/95 $13,134 NA $13,574
1/31/96 $13,235 NA $13,676
2/28/96 $13,051 NA $13,584
3/31/96 $12,839 NA $13,410
4/30/96 $12,804 NA $13,372
5/31/96 $12,791 NA $13,367
6/30/96 $12,919 NA $13,513
7/31/96 $13,039 NA $13,635
8/31/96 $13,024 $12,824 $13,632
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC 0.4% 5.6%
- ---------------------------------------------------------
Without CDSC 5.4% 5.9%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 2/3/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF TIMOTHY T. BROWSE]
"Maryland has a great deal of hospital issues, so we are fairly high in our
hospital weighting. Because the state has been very diligent in keeping health
care costs down, it is given a great deal of flexibility in determining health
care rates. This provides for a stronger overall environment for the state's
health care bonds.
I have begun to diversify away from health care somewhat because many of those
bonds have appreciated in price, and I want to avoid becoming too concentrated
in this sector. This allows me to diversify the portfolio's holdings. Also, it
frees me up to buy back into this attractive sector when the prices drop."
- Timothy T. Browse
10
<PAGE> 11
EV MARATHON MISSOURI MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF MEDICAL SYMBOL]
Missouri Health and Educational
Facilities Authority--Lake of the
Ozarks General Hospital
The proceeds from this bond issue will help finance the growth and operations of
the Lake of the Ozarks General Hospital, a 91-bed facility located in central
Missouri.
The hospital has little direct competition--the nearest hospital is 60 miles
away--and captures most of the patient business in its area. The bond proceeds
will finance the addition of physicians and hospital services. One such service
is a cardiac catherization laboratory, which the bond proceeds will help build
and equip.
- --------------------------------------------------------------------------------
[GRAPHIC OF MISSOURI]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
<TABLE>
<S> <C>
Number of issues...................................... 71
Average quality....................................... AA-
Investment grade...................................... 92.9%
Effective maturity.................................... 17.46 yrs.
Largest sectors:
Insured hospitals.................................. 15.4%*
Industrial development revenue..................... 11.7
Hospitals.......................................... 9.5
Lease/certificate of participation................. 8.3
Insured utilities.................................. 7.2*
</TABLE>
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Missouri
Missouri has a strong, well-diversified economy, excellent financial management,
and a low debt burden. This healthy combination, along with the AAA Standard
& Poor's rating on its General Obligation debt, enables Missouri to attract
municipal financing with ease.
Economic conditions in Missouri are outstanding. Growth has outpaced the U.S.
average, with significant employment gains in health care, computer services,
and gaming. Computer-related businesses are flourishing in the St. Louis and
Kansas City metropolitan areas. In particular, Gateway 2000 and Electronic Data
Systems, Inc. are adding significantly to their payrolls.
Manufacturing, which consists primarily of the automotive and defense-related
industries, has not been hit as hard as in other states. All of the "Big Three"
auto makers have healthy operating facilities, with vans and minivans as their
primary output. In addition, McDonnell-Douglas recently received a $40 billion
contract from the U.S. Air Force, which will allow this company--the largest
employer in the state--to continue operations well past the year 2000.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Missouri Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From May 31, 1992, through August 31, 1996
EV MARATHON MISSOURI MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Fund w/
Date Fund CDSC Index
<S> <C> <C> <C>
5/31/92+ $10,000 NA $10,000
6/30/92 $10,245 NA $10,168
7/31/92 $10,635 NA $10,473
8/31/92 $10,480 NA $10,370
9/30/92 $10,528 NA $10,438
10/31/92 $10,192 NA $10,336
11/30/92 $10,593 NA $10,521
12/31/92 $10,722 NA $10,628
1/31/93 $10,857 NA $10,752
2/28/93 $11,379 NA $11,141
3/31/93 $11,259 NA $11,023
4/30/93 $11,395 NA $11,134
5/31/93 $11,481 NA $11,197
6/30/93 $11,679 NA $11,384
7/31/93 $11,645 NA $11,398
8/31/93 $11,913 NA $11,636
9/30/93 $12,071 NA $11,769
10/31/93 $12,057 NA $11,791
11/30/93 $11,894 NA $11,687
12/31/93 $12,175 NA $11,934
1/31/94 $12,317 NA $12,070
2/28/94 $11,938 NA $11,758
3/31/94 $11,236 NA $11,279
4/30/94 $11,276 NA $11,374
5/31/94 $11,395 NA $11,473
6/30/94 $11,310 NA $11,406
7/31/94 $11,540 NA $11,612
8/31/94 $11,548 NA $11,652
9/30/94 $11,307 NA $11,481
10/31/94 $10,997 NA $11,277
11/30/94 $10,683 NA $11,073
12/31/94 $11,037 NA $11,317
1/31/95 $11,477 NA $11,641
2/28/95 $11,892 NA $11,979
3/31/95 $11,981 NA $12,117
4/30/95 $11,996 NA $12,131
5/31/95 $12,425 NA $12,518
6/30/95 $12,226 NA $12,409
7/31/95 $12,275 NA $12,526
8/31/95 $12,451 NA $12,685
9/30/95 $12,523 NA $12,765
10/31/95 $12,749 NA $12,951
11/30/95 $13,024 NA $13,166
12/31/95 $13,180 NA $13,292
1/31/96 $13,266 NA $13,393
2/28/96 $13,085 NA $13,302
3/31/96 $12,828 NA $13,132
4/30/96 $12,781 NA $13,095
5/31/96 $12,780 NA $13,090
6/30/96 $12,918 NA $13,233
7/31/96 $13,049 NA $13,353
8/31/96 $13,023 $12,823 $13,350
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.4% 6.1%
- ---------------------------------------------------------
Without CDSC 4.6% 6.5%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 5/1/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF CYNTHIA J. CLEMSON]
"In Missouri, I have purchased several lower-rated credits which should be good
core holdings in the portfolio. These issues include Lake of the Ozarks Bridge,
Kansas City Industrial Development Authority--Afco Cargo Facility, Missouri
Health and Education--Lake of the Ozarks, and Missouri Lutheran Senior
Services.
I have also been buying premium and discount bonds, and staying away from
current coupon bonds. This 'barbell' approach helps to maintain good upside
potential while limiting downside volatility."
-- Cynthia J. Clemson
11
<PAGE> 12
EV MARATHON NORTH CAROLINA MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF MEDICAL SYMBOL]
Charlotte-Mecklenburg Hospital
Authority - Health Care System
Revenue Bonds
The proceeds from this bond issue have been used for construction and equipment
improvements for "The Health Care System," one of the largest vertically
integrated health care organizations in the Southeast.
The Health Care System's facilities consist of the Carolinas Medical Center,
Huntersville Oaks Nursing Home/Brookwood, the Charlotte Institute of
Rehabilitation, the Sardis Nursing Home, and University Hospital in Charlotte.
[GRAPHIC OF NORTH CAROLINA]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues...................................... 82
Average quality....................................... AA-
Investment grade...................................... 98.5%
Effective maturity.................................... 15.70 yrs.
Largest sectors:
Hospitals.......................................... 19.2%
Industrial development revenue..................... 13.6
Housing............................................ 12.1
Utilities.......................................... 9.1
Insured hospitals.................................. 8.6*
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: N. Carolina
North Carolina has enjoyed an unusually healthy mix of economic trends, which
should continue for several years to come. North Carolina's economy bounced back
from the recession of 1990-1991, aided by increasing economic diversity away
from manufacturing and into trade, financial services, and construction. Job
growth since 1992 has averaged 3% per year. Other positive trends include
favorable living conditions and low unemployment which, along with increasing
job growth, have contributed to a significant population increase in the major
metropolitan areas. This, in turn, has aided the booming construction industry.
Historically, the North Carolina economy has been driven by manufacturing,
particularly the tobacco, textile and furniture industries. Manufacturing
remains the dominant sector, comprising 31% of the economy, and continues to
grow well ahead of the nation. Non-manufacturing growth is also steaming ahead,
with 2.3% annual growth forecast through the end of the decade.
North Carolina's General Obligation debt has earned top ratings by the Standard
& Poor's and Moody's rating services because of the state's conservative fiscal
policies, budget surpluses, and very low per capita debt levels.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon North Carolina Municipals Fund (including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From October 31, 1991, through August 31, 1996.
EV MARATHON NORTH CAROLINA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
10/31/91+ $10,000 NA $10,000
11/30/91 $9,920 NA $10,028
12/31/91 $10,226 NA $10,243
1/31/92 $10,208 NA $10,266
2/29/92 $10,217 NA $10,270
3/31/92 $10,214 NA $10,273
4/30/92 $10,307 NA $10,365
5/31/92 $10,474 NA $10,487
6/30/92 $10,695 NA $10,663
7/31/92 $11,111 NA $10,983
8/31/92 $10,845 NA $10,876
9/30/92 $10,843 NA $10,947
10/31/92 $10,525 NA $10,839
11/30/92 $10,899 NA $11,033
12/31/92 $11,052 NA $11,146
1/31/93 $11,171 NA $11,276
2/28/93 $11,606 NA $11,683
3/31/93 $11,426 NA $11,560
4/30/93 $11,567 NA $11,676
5/31/93 $11,634 NA $11,742
6/30/93 $11,827 NA $11,938
7/31/93 $11,790 NA $11,954
8/31/93 $12,089 NA $12,203
9/30/93 $12,219 NA $12,342
10/31/93 $12,192 NA $12,366
11/30/93 $12,043 NA $12,256
12/31/93 $12,321 NA $12,515
1/31/94 $12,468 NA $12,658
2/28/94 $12,107 NA $12,330
3/31/94 $11,445 NA $11,828
4/30/94 $11,497 NA $11,929
5/31/94 $11,573 NA $12,032
6/30/94 $11,449 NA $11,962
7/31/94 $11,651 NA $12,178
8/31/94 $11,681 NA $12,220
9/30/94 $11,488 NA $12,041
10/31/94 $11,188 NA $11,827
11/30/94 $10,849 NA $11,613
12/31/94 $11,180 NA $11,868
1/31/95 $11,577 NA $12,208
2/28/95 $11,947 NA $12,563
3/31/95 $12,064 NA $12,707
4/30/95 $12,042 NA $12,722
5/31/95 $12,341 NA $13,128
6/30/95 $12,122 NA $13,013
7/31/95 $12,160 NA $13,136
8/31/95 $12,269 NA $13,303
9/30/95 $12,354 NA $13,387
10/31/95 $12,626 NA $13,582
11/30/95 $12,911 NA $13,807
12/31/95 $13,047 NA $13,940
1/31/96 $13,085 NA $14,045
2/28/96 $12,920 NA $13,950
3/31/96 $12,715 NA $13,772
4/30/96 $12,715 NA $13,733
5/31/96 $12,700 NA $13,728
6/30/96 $12,805 NA $13,878
7/31/96 $12,889 NA $14,003
8/31/96 $12,861 $12,662 $14,000
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.2% 5.0%
- ---------------------------------------------------------
Without CDSC 4.8% 5.4%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 10/23/91. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF ROBERT B. MACINTOSH]
"North Carolina's economy continues to do well. They have a terrific mix of
agriculture and industry, and the labor costs are still very attractive. It is
one of the top industrial states in the country, with a very diverse economic
base.
Generally, the bonds in North Carolina are highly rated because of the strong
economy. As a result, it is difficult to find higher yielding issues, so we tend
to hold the ones we do find.
Bond issues from two major utilities - Catawba and Eastern Utilities - have come
under some credit pressure because of competition. We are, however, confident in
their ability to compete."
- Robert B. MacIntosh
12
<PAGE> 13
EV MARATHON OREGON MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF ELECTRIC WIRES]
City of Eugene, Oregon
Electric Utility System
Revenue Bonds
Proceeds from this issue are used for the Eugene Water & Electric Board's
continued operation of the electric and water systems. The electric system
consists of the Distribution Division and the Trojan Nuclear Plant.
The Distribution Division provides electricity to a 238-square mile area,
including the city of Eugene and adjacent suburban areas. Generation facilities
include four hydroelectric plants and two steam electric cogeneration units.
[GRAPHIC OF OREGON]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
<TABLE>
<S> <C>
Number of issues....................................... 76
Average quality........................................ AA-
Investment grade....................................... 96.6%
Effective maturity..................................... 15.60 yrs.
Largest sectors:
Housing............................................. 15.7%
General obligations................................. 13.7
Utilities........................................... 9.0
Industrial development revenue...................... 8.2
Special tax revenue................................. 7.2
</TABLE>
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Oregon
Oregon has experienced healthy, above-average economic growth since the late
1980s. This growth can be attributed to a steady increase in population, a
diverse, expanding economy, and the government's ability to meet ever-demanding
spending needs without increasing revenue sources.
The population growth is the direct result of an inmigration trend that began in
the recession of 1990-1991. The majority of those moving to Oregon are from
California, whose economy has suffered significant layoffs across several
industries. However, California's economy is now improving, and this may cause a
slowing in Oregon's residential construction sector as fewer Californians move
to the state.
Oregon's economy is well-diversified, and the growing service sector now
accounts for one quarter of all non-agricultural employment. The state is also
becoming less and less dependent upon the timber industry, reducing the impact
of that industry's job losses over the past few years. High-tech manufacturing
has seen strong growth in the past year, as has the construction industry, which
is currently growing at a remarkable 15% annual rate.
The state's general obligation debt - although somewhat high relative to other
states - is manageable, and the state benefits from a large surplus of funds
built up over the past seven years from a growing revenue base.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Oregon Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From December 31, 1991, through August 31, 1996
EV MARATHON OREGON MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
12/31/91+ $10,000 NA $10,000
1/31/92 $ 9,990 NA $10,023
2/29/92 $10,054 NA $10,026
3/31/92 $10,028 NA $10,030
4/30/92 $10,148 NA $10,119
5/31/92 $10,331 NA $10,238
6/30/92 $10,506 NA $10,410
7/31/92 $10,866 NA $10,722
8/31/92 $10,682 NA $10,618
9/30/92 $10,710 NA $10,687
10/31/92 $10,404 NA $10,582
11/30/92 $10,772 NA $10,772
12/31/92 $10,943 NA $10,882
1/31/93 $11,102 NA $11,008
2/28/93 $11,551 NA $11,406
3/31/93 $11,469 NA $11,286
4/30/93 $11,586 NA $11,399
5/31/93 $11,662 NA $11,463
6/30/93 $11,874 NA $11,655
7/31/93 $11,903 NA $11,670
8/31/93 $12,165 NA $11,913
9/30/93 $12,259 NA $12,049
10/31/93 $12,254 NA $12,072
11/30/93 $12,128 NA $11,966
12/31/93 $12,405 NA $12,218
1/31/94 $12,562 NA $12,358
2/28/94 $12,192 NA $12,038
3/31/94 $11,488 NA $11,547
4/30/94 $11,539 NA $11,646
5/31/94 $11,625 NA $11,746
6/30/94 $11,502 NA $11,678
7/31/94 $11,714 NA $11,889
8/31/94 $11,743 NA $11,930
9/30/94 $11,481 NA $11,755
10/31/94 $11,171 NA $11,546
11/30/94 $10,857 NA $11,337
12/31/94 $11,232 NA $11,587
1/31/95 $11,660 NA $11,918
2/28/95 $12,098 NA $12,265
3/31/95 $12,176 NA $12,406
4/30/95 $12,166 NA $12,420
5/31/95 $12,558 NA $12,816
6/30/95 $12,351 NA $12,704
7/31/95 $12,412 NA $12,825
8/31/95 $12,591 NA $12,987
9/30/95 $12,663 NA $13,069
10/31/95 $12,883 NA $13,259
11/30/95 $13,115 NA $13,480
12/31/95 $13,249 NA $13,609
1/31/96 $13,310 NA $13,712
2/28/96 $13,159 NA $13,619
3/31/96 $12,968 NA $13,445
4/30/96 $12,942 NA $13,407
5/31/96 $12,939 NA $13,402
6/30/96 $13,054 NA $13,548
7/31/96 $13,123 NA $13,671
8/31/96 $13,070 $12,870 $13,668
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -1.2% 5.5%
- ---------------------------------------------------------
Without CDSC 3.8% 5.9%
- ---------------------------------------------------------
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal will flucuate 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 12/24/91. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF DAVID C. REILLY]
"Oregon is a very positive story. They have a surplus in their state budget,
reflecting an overall improvement in their economy and fiscal management. As a
result, their general obligation bond ratings were recently upgraded by Standard
& Poor's from AA- to AA.
Our research staff is adept at finding good credit quality in non-rated
holdings. This gives us higher-yielding securities without necessarily adding
significant risk. We are also enhancing the performance characteristics of the
Fund by investing in premium and discount bonds and staying away from current
coupon bonds. This helps to maintain good upside potential while limiting
downside volatility."
- David C. Reilly
13
<PAGE> 14
EV MARATHON SOUTH CAROLINA MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF A FACTORY]
Aiken County Industrial
Development Revenue Bonds -
Beloit Corporation Project
Proceeds from these bonds are being used to finance the acquisition,
construction, installation and equipping of a 97,500 square foot heavy
manufacturing facility located in Aiken County. The facility recovers
rubber-covered and plastic-covered industrial rollers used in the paper and
textile industries, and also serves as a repair facility for paper mill
customers across the southeastern U.S.
This facility, operated by Beloit Manhattan, Inc., is an excellent example of
how municipal financing, combined with private sector investment, can bring jobs
to a community
[GRAPHIC OF SOUTH CAROLINA]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
<TABLE>
<S> <C>
Number of issues....................................... 48
Average quality........................................ A+
Investment grade....................................... 96.1%
Effective maturity..................................... 15.49 yrs.
Largest sectors:
Industrial development revenue...................... 29.5%
Housing............................................. 13.7
Utilities........................................... 13.5
Insured hospitals................................... 8.0*
Insured utilities................................... 7.8*
</TABLE>
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: S. Carolina
South Carolina has struggled to improve its economy and its state finances, and
it is now showing solid progress on both fronts. Economically, South Carolina
has had to deal with large job losses resulting from the closing of two major
military facilities - Myrtle Beach Air Force Base and the Charleston Naval Base.
By providing a low cost of living and a friendly tax environment, however, South
Carolina has attracted significant private investment to help grow the economy
in spite of the military downsizing. Private investment by such industrial
giants as Bavarian Motor Works (BMW), Michelin Corp., Nucor Corp., and Beloit
Corp. totalled $5.3 billion in 1995, and, according to Standard & Poor's, this
trend should continue for the rest of the decade. The state's economy is also
becoming more diverse, with the trade and service sectors fueling growth amid
declines in the textile and agriculture sectors. A significant increase in
tourism and a continuing influx of retirees has provided the basis for the
growth in services and trade, and these trends should also continue.
Fiscally, South Carolina's state government suffered budget deficits in the late
1980s and early 1990s, but it is now on track. In 1993, the legislature brought
spending under more strict control, and the state has had budget surpluses since
then.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon South Carolina Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From October 31, 1992, through August 31, 1996
EV MARATHON SOUTH CAROLINA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
10/31/92+ $10,000 NA $10,000
11/30/92 $10,286 NA $10,179
12/31/92 $10,434 NA $10,283
1/31/93 $10,577 NA $10,403
2/28/93 $11,065 NA $10,779
3/31/93 $10,941 NA $10,665
4/30/93 $11,064 NA $10,773
5/31/93 $11,115 NA $10,833
6/30/93 $11,268 NA $11,014
7/31/93 $11,264 NA $11,028
8/31/93 $11,540 NA $11,258
9/30/93 $11,696 NA $11,386
10/31/93 $11,680 NA $11,408
11/30/93 $11,536 NA $11,308
12/31/93 $11,834 NA $11,546
1/31/94 $11,941 NA $11,678
2/28/94 $11,571 NA $11,376
3/31/94 $10,912 NA $10,913
4/30/94 $10,983 NA $11,005
5/31/94 $11,055 NA $11,100
6/30/94 $10,957 NA $11,036
7/31/94 $11,162 NA $11,235
8/31/94 $11,189 NA $11,274
9/30/94 $11,003 NA $11,108
10/31/94 $10,714 NA $10,911
11/30/94 $10,409 NA $10,714
12/31/94 $10,692 NA $10,950
1/31/95 $11,059 NA $11,263
2/28/95 $11,402 NA $11,590
3/31/95 $11,535 NA $11,723
4/30/95 $11,501 NA $11,737
5/31/95 $11,810 NA $12,112
6/30/95 $11,634 NA $12,006
7/31/95 $11,670 NA $12,119
8/31/95 $11,820 NA $12,273
9/30/95 $11,891 NA $12,351
10/31/95 $12,127 NA $12,530
11/30/95 $12,400 NA $12,739
12/31/95 $12,542 NA $12,861
1/31/96 $12,602 NA $12,958
2/28/96 $12,420 NA $12,870
3/31/96 $12,236 NA $12,706
4/30/96 $12,187 NA $12,670
5/31/96 $12,196 NA $12,665
6/30/96 $12,334 NA $12,803
7/31/96 $12,477 NA $12,919
8/31/96 $12,401 $12,101 $12,916
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC -0.1% 4.4%
- ---------------------------------------------------------
Without CDSC 4.9% 5.1%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 10/2/92. +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.
FROM THE PORTFOLIO MANAGER:
[PICTURE OF THOMAS J. FETTER]
"The business-friendly environment in South Carolina has enabled me to make use
of higher-yielding industrial revenue bonds. These bonds - which also increase
the Federal alternative minimum tax (AMT) exposure - not only help the state's
economy, but can also give shareholders higher yield without significantly
increasing risk. Our research staff has done an excellent job of finding
high-quality industrial revenue issues.
I have been buying more premium and discount bonds, which helps to maintain good
upside potential while limiting downside volatility, and have also increased
call protection, an on-going management technique which helps increase the
Fund's total return."
- Thomas J. Fetter
14
<PAGE> 15
EV MARATHON TENNESSEE MUNICIPALS FUND
YOUR INVESTMENT AT WORK [GRAPHIC OF ELECTRIC WIRES]
Lawrenceburg, Tennessee Electric
System Revenue Bonds
The proceeds of this bond issue help finance the ongoing operations of the
electrical distribution system for the city of Lawrenceburg, Tennessee. Expenses
include the construction, improvement and extension of the distribution system,
as well as the acquisition of all property, and the payment of all legal,
administration and engineering costs.
This electric system has no generating capacity, purchasing its entire supply of
power from the Tennessee Valley Authority (TVA).
[GRAPHIC OF TENNESSEE]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues....................................... 55
Average quality........................................ AA-
Investment grade....................................... 100.0%
Effective maturity..................................... 17.63 yrs.
Largest sectors:
Industrial development revenue...................... 24.6%
Housing............................................. 14.6
Insured hospital.................................... 12.2*
Insured utilities................................... 7.2*
Insured education................................... 6.4*
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Tennessee
While many states in the South are diversifying away from manufacturing and into
economic sectors such as trade and services, Tennessee has a solid
manufacturing-based economy which has continued to strengthen over the past few
years. In the first half of 1996, for example, the manufacturing sector created
almost 3,000 new jobs, 60% more than the same period the year before. New
investment from this expansion totaled $917.7 million - more than double that
during the first half of 1995 - according to the Tennessee Department of
Economic and Community Development.
The down side of this reliance on manufacturing is that the state may be more
susceptible to cycles in the economy. This vulnerability could be aggravated by
the state's dependence on sales taxes for a substantial amount of its revenues.
Tennessee has avoided financial difficulties, however, by managing its
expenditures very carefully. The state still has a balanced budget, despite the
growth of Tenncare, a new managed health care program designed to control
Medicaid expenses, which has proven more costly than anticipated.
Tennessee has relatively low debt levels and amortizes its outstanding debt at a
quick pace. Moreover, the state is an infrequent borrower in the municipal
markets. Consequently, its bonds carry high ratings.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Tennessee Municipals Fund (including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From August 31, 1992, through August 31, 1996
EV MARATHON TENNESSEE MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
Date Fund CDSC Index
<S> <C> <C> <C>
8/31/92+ $10,000 NA $10,000
9/30/92 $9,970 NA $10,065
10/31/92 $9,709 NA $9,966
11/30/92 $10,110 NA $10,145
12/31/92 $10,276 NA $10,249
1/31/93 $10,437 NA $10,368
2/28/93 $10,865 NA $10,743
3/31/93 $10,733 NA $10,629
4/30/93 $10,906 NA $10,736
5/31/93 $11,008 NA $10,797
6/30/93 $11,242 NA $10,977
7/31/93 $11,238 NA $10,991
8/31/93 $11,520 NA $11,220
9/30/93 $11,662 NA $11,348
10/31/93 $11,657 NA $11,370
11/30/93 $11,505 NA $11,270
12/31/93 $11,767 NA $11,508
1/31/94 $11,917 NA $11,639
2/28/94 $11,551 NA $11,338
3/31/94 $10,876 NA $10,876
4/30/94 $10,904 NA $10,968
5/31/94 $11,021 NA $11,063
6/30/94 $10,914 NA $10,999
7/31/94 $11,174 NA $11,197
8/31/94 $11,203 NA $11,236
9/30/94 $10,963 NA $11,071
10/31/94 $10,633 NA $10,874
11/30/94 $10,309 NA $10,678
12/31/94 $10,637 NA $10,913
1/31/95 $11,073 NA $11,225
2/28/95 $11,485 NA $11,551
3/31/95 $11,550 NA $11,684
4/30/95 $11,518 NA $11,698
5/31/95 $11,862 NA $12,071
6/30/95 $11,642 NA $11,965
7/31/95 $11,714 NA $12,079
8/31/95 $11,889 NA $12,232
9/30/95 $11,960 NA $12,309
10/31/95 $12,197 NA $12,488
11/30/95 $12,469 NA $12,696
12/31/95 $12,648 NA $12,817
1/31/96 $12,673 NA $12,914
2/28/96 $12,517 NA $12,827
3/31/96 $12,335 NA $12,663
4/30/96 $12,311 NA $12,627
5/31/96 $12,322 NA $12,622
6/30/96 $12,435 NA $12,760
7/31/96 $12,552 NA $12,876
8/31/96 $12,502 $12,302 $12,873
</TABLE>
<TABLE>
<CAPTION>
1 Life of
Average Annual Returns Year Fund*
- ---------------------------------------------------------
<S> <C> <C>
With CDSC 0.2% 5.4%
- ---------------------------------------------------------
Without CDSC 5.2% 5.8%
</TABLE>
Fund, assuming entire investment was redeemed on 8/31/96 & max. applicable
contingent deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 8/25/92. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF CYNTHIA J. CLEMSON]
"In Tennessee, I have purchased several new non-callable issues, and long call
issues at current market prices. This improves the overall call protection of
the fund.
I am also always on the lookout for industrial development bonds, which provide
an excellent opportunity to add yield without taking on additional risk. Our
research staff has become more and more important in helping us locate these
opportunities.
I have been buying premium and discount bonds, and staying away from current
coupon bonds. This 'barbell' approach helps to maintain good upside potential
while limiting downside volatility."
- Cynthia J. Clemson
15
<PAGE> 16
EV MARATHON VIRGINIA MUNICIPALS FUND
YOUR INVESTMENT AT WORK
Southeastern Public Service [GRAPHIC OF HARDHAT WORKER]
Authority - Regional Solid
Waste System
The proceeds from these bonds are being used to finance the capital improvements
and additions to the regional solid waste system in southeastern Virginia. This
includes new power plant equipment for the Navy, additional collection equipment
for the curbside recycling program, and much needed equipment related to
landfill maintenance.
The 2,000 square mile area benefitting from the improvements includes the cities
of Chesapeake, Franklin, Norfolk, Portsmouth, Suffolk and Virginia Beach, and
the counties of Isle of Wight and Southampton.
[GRAPHIC OF VIRGINIA]
PORTFOLIO OVERVIEW
Based on market value as of August 31, 1996
Number of issues....................................... 90
Average quality........................................ AA-
Investment grade....................................... 95.1
Effective maturity..................................... 15.69 yrs.
Largest sectors:
Hospitals........................................... 18.3%
Housing............................................. 13.3
Industrial development revenue...................... 11.9
Insured hospitals................................... 8.6*
Lease/certificate of participation.................. 7.7
* Private insurance does not remove the market risks that are associated with
these investments.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: Virginia
Virginia, like many other Southern U.S. states, has seen a fundamental,
long-term shift in its economy away from the manufacturing and mining sectors
and into the trade and service sectors. According to the Virginia Employment
Commission, in the 9-year period from 1985 to 1994 the service and retail trade
sectors accounted for 72% of all new jobs, and the service sector emerged as the
leading employer by the end of this period. At the same time, a geographic shift
also occurred, with the majority of new jobs moving to the three largest urban
areas: Northern Virginia, Richmond-Petersburg, and Norfolk-Newport News.
In recent years, Virginia has experienced a continuation of these trends. For
example, the service sector in 1995 created 43,000 new jobs - the most of any
sector - primarily in professions such as high-tech, engineering, architecture,
and accounting. Employment in manufacturing and mining, meanwhile, continued to
decline from 1994-1995.
1996 has brought continued growth to Virginia's economy. The six-month moving
average of economic indicators, compiled by the Virginia Employment
Commission, edged up in the first quarter. For the remainder of 1996 and for
1997, non-agricultural employment is expected to grow 2% per year.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in
EV Marathon Virginia Municipals Fund (Including Sales Charge)
and the Lehman Brothers Municipal Bond Index
From July 31, 1991, through August 31, 1996
<TABLE>
<CAPTION>
EV MARATHON VIRGINIA MUNICIPALS FUND VS.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
Date Fund CDSC Index
<S> <C> <C> <C>
7/31/91+ $10,000 NA $10,000
8/31/91 $10,080 NA $10,132
9/30/91 $10,262 NA $10,264
10/31/91 $10,374 NA $10,356
11/30/91 $10,369 NA $10,385
12/31/91 $10,655 NA $10,608
1/31/92 $10,606 NA $10,632
2/29/92 $10,618 NA $10,636
3/31/92 $10,564 NA $10,639
4/30/92 $10,681 NA $10,734
5/31/92 $10,830 NA $10,861
6/30/92 $11,036 NA $11,043
7/31/92 $11,440 NA $11,374
8/31/92 $11,224 NA $11,263
9/30/92 $11,202 NA $11,337
10/31/92 $10,892 NA $11,225
11/30/92 $11,285 NA $11,426
12/31/92 $11,414 NA $11,543
1/31/93 $11,539 NA $11,677
2/28/93 $11,995 NA $12,100
3/31/93 $11,837 NA $11,972
4/30/93 $11,972 NA $12,092
5/31/93 $12,009 NA $12,160
6/30/93 $12,198 NA $12,364
7/31/93 $12,186 NA $12,379
8/31/93 $12,437 NA $12,637
9/30/93 $12,682 NA $12,781
10/31/93 $12,579 NA $12,806
11/30/93 $12,428 NA $12,693
12/31/93 $12,735 NA $12,961
1/31/94 $12,874 NA $13,109
2/28/94 $12,508 NA $12,770
3/31/94 $11,905 NA $12,249
4/30/94 $11,949 NA $12,353
5/31/94 $11,993 NA $12,460
6/30/94 $11,856 NA $12,388
7/31/94 $12,041 NA $12,611
8/31/94 $12,085 NA $12,655
9/30/94 $11,914 NA $12,469
10/31/94 $11,611 NA $12,248
11/30/94 $11,291 NA $12,026
12/31/94 $11,606 NA $12,291
1/31/95 $12,011 NA $12,642
2/28/95 $12,414 NA $13,010
3/31/95 $12,546 NA $13,160
4/30/95 $12,525 NA $13,175
5/31/95 $12,918 NA $13,596
6/30/95 $12,683 NA $13,477
7/31/95 $12,723 NA $13,604
8/31/95 $12,885 NA $13,777
9/30/95 $12,974 NA $13,864
10/31/95 $13,227 NA $14,065
11/30/96 $13,505 NA $14,299
12/31/95 $13,696 NA $14,436
1/31/96 $13,749 NA $14,545
2/28/96 $13,556 NA $14,447
3/31/96 $13,336 NA $14,263
4/30/96 $13,298 NA $14,222
5/31/96 $13,323 NA $14,217
6/30/96 $13,457 NA $14,372
7/31/96 $13,556 NA $14,502
8/31/96 $13,489 $13,389 $14,499
</TABLE>
<TABLE>
<CAPTION>
Average 1 5 Life of
Annual Returns Year Years Fund*
- ---------------------------------------------
<S> <C> <C> <C>
With CDSC -0.3% 5.7% 5.9%
- ---------------------------------------------
Without CDSC 4.7% 6.0% 6.1%
</TABLE>
Fund, with entire investment redeemed on 8/31/96 & max. applicable contingent
deferred sales charge deducted from proceeds
Past performance is not indicative of future results. Investment returns and
principal 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 7/26/91. +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.
FROM THE PORTFOLIO MANAGER:
[PHOTO OF DAVID C. REILLY]
"Virginia's economy is excellent. The substantial government and defense
presence in Virginia has created a very stable economy, with very high income
and personal wealth levels. Also, the state government has done an excellent job
with the budget.
Our research staff is adept at finding good credit quality in non-rated
holdings. This gives us higher-yielding securities without necessarily adding
significant risk. We are also enhancing the performance characteristics of the
Fund by investing in premium and discount bonds and staying away from current
coupon bonds. This helps to maintain good upside potential while limiting
downside volatility."
- David C. Reilly
16
<PAGE> 17
- --------------------------------------------------------------------------------
EV Marathon Municipals Funds
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
ALABAMA ARKANSAS GEORGIA KENTUCKY
FUND FUND FUND FUND
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $ 99,617,854 $72,041,980 $104,152,652 $128,415,642
Unrealized appreciation 2,675,295 1,038,564 3,208,603 3,359,756
------------ ----------- ------------ ------------
Total investment in Portfolio, at value (Note 1A) $102,293,149 $73,080,544 $107,361,255 $131,775,398
Receivable for Fund shares sold 40,021 58,620 12,007 72,111
Deferred organization expenses (Note 1D) 2,073 2,020 503 188
------------ ----------- ------------ ------------
Total assets $102,335,243 $73,141,184 $107,373,765 $131,847,697
------------ ----------- ------------ ------------
LIABILITIES:
Dividends payable $ 198,281 $ 141,189 $ 217,615 $ 259,817
Payable for Fund shares redeemed 325,391 93,904 101,932 159,755
Payable to affiliates --
Trustees' fees (Note 4) 551 275 551 551
Accrued expenses 119,214 37,872 61,336 70,518
------------ ----------- ------------ ------------
Total liabilities $ 643,437 $ 273,240 $ 381,434 $ 490,641
------------ ----------- ------------ ------------
NET ASSETS $101,691,806 $72,867,944 $106,992,331 $131,357,056
============ =========== ============ ============
SOURCES OF NET ASSETS:
Paid-in capital $102,048,327 $74,506,377 $111,809,538 $133,182,354
Accumulated net realized loss on investment and
financial futures transactions (computed on
the basis of identified cost) (3,078,073) (2,670,755) (8,122,880) (4,987,168)
Accumulated undistributed (distributions in excess
of) net investment income 46,257 (6,242) 97,070 (197,886)
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 2,675,295 1,038,564 3,208,603 3,359,756
------------ ----------- ------------ ------------
Total $101,691,806 $72,867,944 $106,992,331 $131,357,056
============ =========== ============ ============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 9,721,801 7,150,636 10,905,184 13,175,763
============ =========== ============ ============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE (NOTE 6) (net assets divided by
shares of beneficial interest outstanding) $10.46 $10.19 $9.81 $9.97
====== ====== ===== =====
</TABLE>
See notes to financial statements
17
<PAGE> 18
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
FUND FUND FUND FUND
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $32,588,209 $108,268,986 $80,523,593 $162,518,058
Unrealized appreciation 499,984 1,361,797 2,247,285 7,966,320
----------- ------------ ----------- ------------
Total investment in Portfolio, at value (Note 1A) $33,088,193 $109,630,783 $82,770,878 $170,484,378
Receivable for Fund shares sold 7,988 52,930 7,263 38,935
Deferred organization expenses (Note 1D) 1,861 644 1,851 769
----------- ------------ ----------- ------------
Total assets $33,098,042 $109,684,357 $82,779,992 $170,524,082
----------- ------------ ----------- ------------
LIABILITIES:
Dividends payable $ 69,659 $ 214,539 $ 161,891 $ 343,723
Payable for Fund shares redeemed 17,429 167,615 188,202 191,001
Payable to affiliates --
Trustees' fees (Note 4) 27 551 273 551
Accrued expenses 17,408 58,330 44,418 100,237
----------- ------------ ----------- ------------
Total liabilities $ 104,523 $ 441,035 $ 394,784 $ 635,512
----------- ------------ ----------- ------------
NET ASSETS $32,993,519 $109,243,322 $82,385,208 $169,888,570
=========== ============ =========== ============
SOURCES OF NET ASSETS:
Paid-in capital $34,601,053 $110,341,102 $82,428,653 $175,266,250
Accumulated net realized loss on investment and
financial futures transactions (computed on
the basis of identified cost) (2,136,958) (2,618,300) (2,262,636) (13,108,066)
Accumulated undistributed (distributions in
excess of) net investment income 29,440 158,723 (28,094) (235,934)
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 499,984 1,361,797 2,247,285 7,966,320
----------- ------------ ----------- ------------
Total $32,993,519 $109,243,322 $82,385,208 $169,888,570
=========== ============ =========== ============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,311,163 10,607,812 7,839,174 17,044,611
=========== ============ =========== ============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE (NOTE 6) (net assets divided by
shares of beneficial interest outstanding) $9.96 $10.30 $10.51 $9.97
===== ====== ====== =====
</TABLE>
See notes to financial statements
18
<PAGE> 19
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
FUND FUND FUND FUND
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $125,870,297 $ 55,571,498 $53,877,629 $169,065,262
Unrealized appreciation 3,143,343 1,858,374 856,151 7,492,023
------------ ----------- ----------- ------------
Total investment in Portfolio, at value (Note
1A) $129,013,640 $ 57,429,872 $54,733,780 $176,557,285
Receivable for Fund shares sold 12,577 31,500 555 11,821
Deferred organization expenses (Note 1D) 391 2,807 2,253 --
------------ ----------- ----------- ------------
Total assets $129,026,608 $ 57,464,179 $54,736,588 $176,569,106
------------ ----------- ----------- ------------
LIABILITIES:
Dividends payable $ 248,238 $ 116,740 $ 109,402 $ 350,274
Payable for Fund shares redeemed 129,202 99,295 65,358 206,806
Payable to affiliates --
Trustees' fees (Note 4) 547 275 273 551
Accrued expenses 68,578 30,713 28,995 93,097
------------ ----------- ----------- ------------
Total liabilities $ 446,565 $ 247,023 $ 204,028 $ 650,728
------------ ----------- ----------- ------------
NET ASSETS $128,580,043 $ 57,217,156 $54,532,560 $175,918,378
============ =========== =========== ============
SOURCES OF NET ASSETS:
Paid-in capital $130,695,783 $ 59,355,388 $55,641,727 $178,468,088
Accumulated net realized loss on investment and
financial futures transactions (computed on
the basis of identified cost) (5,223,639) (4,136,479) (1,958,629) (9,909,369)
Accumulated undistributed (distributions in
excess of) net investment income (35,444) 139,873 (6,689) (132,364)
Unrealized appreciation of investments and
financial futures contracts from Portfolio
(computed on the basis of identified cost) 3,143,343 1,858,374 856,151 7,492,023
------------ ----------- ----------- ------------
Total $128,580,043 $ 57,217,156 $54,532,560 $175,918,378
============ =========== =========== ============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 12,551,386 5,708,276 5,371,186 17,143,058
============ =========== =========== ============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE (NOTE 6) (net assets divided by
shares of beneficial interest outstanding) $10.24 $10.02 $10.15 $10.26
====== ====== ====== ======
</TABLE>
See notes to financial statements
19
<PAGE> 20
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
ALABAMA ARKANSAS GEORGIA KENTUCKY
FUND FUND FUND FUND
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $6,396,559 $4,582,847 $7,025,916 $ 8,291,909
Expenses allocated from Portfolio (483,314) (362,534) (523,224) (654,461)
---------- ---------- ---------- ----------
Net investment income from Portfolio $5,913,245 $4,220,313 $6,502,692 $ 7,637,448
---------- ---------- ---------- ----------
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,265 $ 1,632 $ 9,693 $ 3,265
Distribution costs (Note 5) 993,520 715,453 1,065,956 1,284,975
Custodian fee (Note 1E) 8,771 9,053 12,665 14,792
Transfer and dividend disbursing agent fees 85,525 62,259 71,031 99,833
Printing and postage 33,990 15,153 37,531 38,658
Legal and accounting services 10,985 12,318 13,683 12,744
Amortization of organization expenses (Note 1D) 3,456 3,620 3,294 2,434
Miscellaneous 14,278 16,367 26,550 21,752
---------- ---------- ---------- ----------
Total expenses $1,153,790 $ 835,855 $1,240,403 $ 1,478,453
Deduct reduction of custodian fee (Note 1E) 6,536 -- 8,625 2,011
---------- ---------- ---------- ----------
Net expenses $1,147,254 $ 835,855 $1,231,778 $ 1,476,442
---------- ---------- ---------- ----------
Net investment income $4,765,991 $3,384,458 $5,270,914 $ 6,161,006
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $1,544,726 $ 407,984 $ 856,570 $ (561,352)
Financial futures contracts (160,575) (121,270) (96,808) (595,841)
---------- ---------- ---------- ----------
Net realized gain (loss) $1,384,151 $ 286,714 $ 759,762 $(1,157,193)
Change in unrealized appreciation (depreciation) (998,165) (461,293) (243,119) 1,295,426
---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) $ 385,986 $ (174,579) $ 516,643 $ 138,233
---------- ---------- ---------- ----------
Net increase in net assets from operations $5,151,977 $3,209,879 $5,787,557 $ 6,299,239
========== ========== ========== ==========
</TABLE>
See notes to financial statements
20
<PAGE> 21
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
FUND FUND FUND FUND
---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $2,028,313 $6,816,270 $ 5,262,604 $ 10,992,724
Expenses allocated from Portfolio (77,510) (551,462) (414,435) (882,062)
---------- ---------- ---------- -----------
Net investment income from Portfolio $1,950,803 $6,264,808 $ 4,848,169 $ 10,110,662
---------- ---------- ---------- -----------
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ -- $ 3,265 $ 1,630 $ 3,265
Distribution costs (Note 5) 303,868 1,038,244 807,077 1,701,465
Custodian fee (Note 1E) 2,239 11,502 10,239 16,874
Transfer and dividend disbursing agent fees 25,626 83,803 62,316 130,951
Printing and postage 11,566 36,605 30,238 52,977
Legal and accounting services 10,071 12,512 12,859 12,162
Registration costs 2,140 2,480 1,525 --
Amortization of organization expenses (Note 1D) 3,360 2,811 3,151 5,596
Miscellaneous 5,859 14,792 7,720 21,612
---------- ---------- ---------- -----------
Total expenses $ 364,729 $1,206,014 $ 936,755 $ 1,944,902
Deduct reduction of custodian fee (Note 1E) 1,597 2,791 -- 13,333
---------- ---------- ---------- -----------
Net expenses $ 363,132 $1,203,223 $ 936,755 $ 1,931,569
---------- ---------- ---------- -----------
Net investment income $1,587,671 $5,061,585 $ 3,911,414 $ 8,179,093
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ (103,608) $1,702,616 $ 1,202,624 $ (152,724)
Financial futures contracts (234,648) (171,980) (87,609) 105,611
---------- ---------- ---------- -----------
Net realized gain (loss) $ (338,256) $1,530,636 $ 1,115,015 $ (47,113)
Change in unrealized appreciation (depreciation) 266,047 (575,339) (1,050,687) 744,828
---------- ---------- ---------- -----------
Net realized and unrealized gain (loss) $ (72,209) $ 955,297 $ 64,328 $ 697,715
---------- ---------- ---------- -----------
Net increase in net assets from operations $1,515,462 $6,016,882 $ 3,975,742 $ 8,876,808
========== ========== ========== ===========
</TABLE>
See notes to financial statements
21
<PAGE> 22
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
FUND FUND FUND FUND
---------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $8,172,484 $3,720,202 $3,378,012 $11,300,845
Expenses allocated from Portfolio (657,975) (305,972) (241,825) (891,655)
---------- ---------- ---------- -----------
Net investment income from Portfolio $7,514,509 $3,414,230 $3,136,187 $10,409,190
---------- ---------- ---------- -----------
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,261 $ 1,632 $ 1,630 $ 3,265
Distribution costs (Note 5) 1,283,280 551,283 518,424 1,720,367
Custodian fee (Note 1E) 13,467 6,528 7,315 23,124
Transfer and dividend disbursing agent fees 98,077 48,687 39,727 124,931
Printing and postage 44,059 12,191 20,630 55,266
Legal and accounting services 15,005 12,066 11,868 12,145
Registration costs 2,183 500 1,385 --
Amortization of organization expenses (Note 1D) 2,952 3,364 3,561 4,964
Miscellaneous 14,425 10,475 7,297 24,898
---------- ---------- ---------- -----------
Total expenses $1,476,709 $ 646,726 $ 611,837 $ 1,968,960
---------- ---------- ---------- -----------
Net investment income $6,037,800 $2,767,504 $2,524,350 $ 8,440,230
---------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ (389,651) $ 766,613 $ 220,816 $ 614,162
Financial futures contracts (536,421) (106,217) (167,592) (431,954)
---------- ---------- ---------- -----------
Net realized gain (loss) $ (926,072) $ 660,396 $ 53,224 $ 182,208
Change in unrealized appreciation (depreciation) 449,198 (485,517) 342,049 134,532
---------- ---------- ---------- -----------
Net realized and unrealized gain (loss) $ (476,874) $ 174,879 $ 395,273 $ 316,740
---------- ---------- ---------- -----------
Net increase in net assets from
operations $5,560,926 $2,942,383 $2,919,623 $ 8,756,970
========== ========== ========== ===========
</TABLE>
See notes to financial statements
22
<PAGE> 23
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
ALABAMA ARKANSAS GEORGIA KENTUCKY
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 4,765,991 $ 3,384,458 $ 5,270,914 $ 6,161,006
Net realized gain (loss) on investments 1,384,151 286,714 759,762 (1,157,193)
Change in unrealized appreciation
(depreciation) of investments (998,165) (461,293) (243,119) 1,295,426
------------ ----------- ------------ ------------
Net increase in net assets from operations $ 5,151,977 $ 3,209,879 $ 5,787,557 $ 6,299,239
------------ ----------- ------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (4,874,378) $ (3,545,480) $ (5,318,073) $ (6,161,006)
In excess of net investment income -- (6,242) -- (154,635)
------------ ----------- ------------ ------------
Total distributions to shareholders $ (4,874,378) $ (3,551,722) $ (5,318,073) $ (6,315,641)
------------ ----------- ------------ ------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $ 4,160,973 $ 2,851,899 $ 3,711,347 $ 5,687,743
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,550,774 1,648,737 2,421,301 3,359,495
Cost of shares redeemed (13,939,744) (12,113,699) (19,752,574) (20,779,572)
------------ ----------- ------------ ------------
Decrease in net assets from Fund share
transactions $ (7,227,997) $ (7,613,063) $(13,619,926) $(11,732,334)
------------ ----------- ------------ ------------
Net decrease in net assets $ (6,950,398) $ (7,954,906) $(13,150,442) $(11,748,736)
NET ASSETS:
At beginning of year 108,642,204 80,822,850 120,142,773 143,105,792
------------ ----------- ------------ ------------
At end of year $101,691,806 $ 72,867,944 $106,992,331 $131,357,056
============ =========== ============ ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF YEAR $ 46,257 $ (6,242) $ 97,070 $ (197,886)
============ =========== ============ ============
</TABLE>
See notes to financial statements
23
<PAGE> 24
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
FUND FUND FUND FUND
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,587,671 $ 5,061,585 $ 3,911,414 $ 8,179,093
Net realized gain (loss) on investments (338,256) 1,530,636 1,112,409 (47,113)
Change in unrealized appreciation
(depreciation) of investments 266,047 (575,339) (1,048,081) 744,828
----------- ------------ ----------- ------------
Net increase in net assets from operations $ 1,515,462 $ 6,016,882 $ 3,975,742 $ 8,876,808
----------- ------------ ----------- ------------
Distributions to shareholders (Note 2) --
From net investment income $(1,600,291) $ (5,239,668) $ (3,911,414) $ (8,215,663)
In excess of net investment income -- -- (27,998) (233,107)
----------- ------------ ----------- ------------
Total distributions to shareholders $(1,600,291) $ (5,239,668) $ (3,939,412) $ (8,448,770)
----------- ------------ ----------- ------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $ 3,990,498 $ 8,472,887 $ 3,803,859 $ 7,140,035
Net asset value of shares issued to
shareholders in payment of distributions
declared 778,827 2,826,305 1,976,726 4,174,817
Cost of shares redeemed (3,526,815) (16,659,034) (13,242,423) (30,304,252)
----------- ------------ ----------- ------------
Increase (decrease) in net assets from Fund
share transactions $ 1,242,510 $ (5,359,842) $ (7,461,838) $(18,989,400)
----------- ------------ ----------- ------------
Net increase (decrease) in net assets $ 1,157,681 $ (4,582,628) $ (7,425,508) $(18,561,362)
NET ASSETS:
At beginning of year 31,835,838 113,825,950 89,810,716 188,449,932
----------- ------------ ----------- ------------
At end of year $32,993,519 $109,243,322 $ 82,385,208 $169,888,570
=========== ============ =========== ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME INCLUDED IN NET ASSETS
AT END OF YEAR $ 29,440 $ 158,723 $ (28,094) $ (235,934)
=========== ============ =========== ============
</TABLE>
See notes to financial statements
24
<PAGE> 25
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
FUND FUND FUND FUND
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 6,037,800 $ 2,767,504 $ 2,524,350 $ 8,440,230
Net realized gain (loss) on investments (926,072) 657,297 53,224 182,208
Change in unrealized appreciation
(depreciation) of investments 449,198 (482,418) 342,049 134,532
------------ ----------- ----------- ------------
Net increase in net assets from operations $ 5,560,926 $ 2,942,383 $ 2,919,623 $ 8,756,970
------------ ----------- ----------- ------------
Distributions to shareholders (Note 2) --
From net investment income $ (6,124,280) $ (2,772,456) $(2,618,373) $ (8,440,230)
In excess of net investment income (35,444) -- (6,689) (112,564)
------------ ----------- ----------- ------------
Total distributions to shareholders $ (6,159,724) $ (2,772,456) $(2,625,062) $ (8,552,794)
------------ ----------- ----------- ------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $ 5,131,313 $ 4,707,873 $ 3,438,193 $ 8,059,179
Net asset value of shares issued to
shareholders in payment of distributions
declared 3,457,570 1,214,658 1,338,936 4,376,528
Cost of shares redeemed (24,465,802) (8,830,561) (8,022,902) (26,256,727)
------------ ----------- ----------- ------------
Decrease in net assets from Fund share
transactions $(15,876,919) $ (2,908,030) $(3,245,773) $(13,821,020)
------------ ----------- ----------- ------------
Net decrease in net assets $(16,475,717) $ (2,738,103) $(2,951,212) $(13,616,844)
NET ASSETS:
At beginning of year 145,055,760 59,955,259 57,483,772 189,535,222
------------ ----------- ----------- ------------
At end of year $128,580,043 $ 57,217,156 $54,532,560 $175,918,378
============ =========== =========== ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN
EXCESS OF) NET INVESTMENT INCOME INCLUDED IN
NET ASSETS AT END OF YEAR $ (35,444) $ 139,873 $ (6,689) $ (132,364)
============ =========== =========== ============
</TABLE>
See notes to financial statements
25
<PAGE> 26
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
ALABAMA ARKANSAS GEORGIA KENTUCKY
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 4,990,080 $ 3,749,505 $ 5,864,764 $ 6,622,988
Net realized loss on investments (2,941,114) (2,498,424) (7,142,220) (2,633,134)
Change in unrealized appreciation of
investments 5,318,362 3,444,180 6,543,128 4,909,921
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 7,367,328 $ 4,695,261 $ 5,265,672 $ 8,899,775
------------ ------------ ------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (4,990,080) $ (3,749,505) $ (5,864,764) $ (6,622,988)
In excess of net investment income (143,078) (182,195) (216,692) (337,010)
------------ ------------ ------------ ------------
Total distributions to shareholders $ (5,133,158) $ (3,931,700) $ (6,081,456) $ (6,959,998)
------------ ------------ ------------ ------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $ 12,491,127 $ 6,780,492 $ 10,649,881 $ 12,444,086
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,652,717 1,884,209 3,052,159 3,708,544
Cost of shares redeemed (14,288,423) (11,041,868) (27,224,917) (16,980,873)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from Fund
share transactions $ 855,421 $ (2,377,167) $(13,522,877) $ (828,243)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets $ 3,089,591 $ (1,613,606) $(14,338,661) $ 1,111,534
NET ASSETS:
At beginning of year 105,552,613 82,436,456 134,481,434 141,994,258
------------ ------------ ------------ ------------
At end of year $108,642,204 $ 80,822,850 $120,142,773 $143,105,792
============ ============ ============ ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME INCLUDED IN NET ASSETS
AT END OF YEAR $ 154,644 $ 161,022 $ 144,229 $ (43,251)
============ ============ ============ ============
</TABLE>
See notes to financial statements
26
<PAGE> 27
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
FUND FUND FUND FUND
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,489,998 $ 5,439,805 $ 4,198,940 $ 8,946,520
Net realized loss on investments (1,537,085) (3,282,559) (2,921,662) (8,776,724)
Change in unrealized appreciation of
investments 1,571,413 4,899,352 5,323,708 8,767,620
----------- ------------ ------------ ------------
Net increase in net assets from operations $ 1,524,326 $ 7,056,598 $ 6,600,986 $ 8,937,416
----------- ------------ ------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $(1,489,998) $ (5,439,805) $ (4,198,940) $ (8,946,520)
In excess of net investment income (73,180) (98,476) (166,866) (410,010)
----------- ------------ ------------ ------------
Total distributions to shareholders $(1,563,178) $ (5,538,281) $ (4,365,806) $ (9,356,530)
----------- ------------ ------------ ------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sales of shares $ 5,214,512 $ 13,615,276 $ 7,129,437 $ 16,332,648
Net asset value of shares issued to
shareholders in payment of distributions
declared 783,732 2,952,321 2,213,888 4,685,433
Cost of shares redeemed (3,143,269) (20,980,838) (12,994,601) (24,816,348)
----------- ------------ ------------ ------------
Increase (decrease) in net assets from Fund
share transactions $ 2,854,975 $ (4,413,241) $ (3,651,276) $ (3,798,267)
----------- ------------ ------------ ------------
Net increase (decrease) in net assets $ 2,816,123 $ (2,894,924) $ (1,416,096) $ (4,217,381)
NET ASSETS:
At beginning of year 29,019,715 116,720,874 91,226,812 192,667,313
----------- ------------ ------------ ------------
At end of year $31,835,838 $113,825,950 $ 89,810,716 $188,449,932
=========== ============ ============ ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF YEAR $ 42,060 $ 336,806 $ (96) $ 36,570
=========== ============ ============ ============
</TABLE>
See notes to financial statements
27
<PAGE> 28
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
FUND FUND FUND FUND
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 6,629,604 $ 2,817,049 $ 2,637,658 $ 9,070,558
Net realized loss on investments (4,308,333) (3,881,747) (1,867,953) (7,513,582)
Change in unrealized appreciation of
investments 7,327,565 4,197,563 2,570,170 10,162,470
------------ ------------ ----------- ------------
Net increase in net assets from operations $ 9,648,836 $ 3,132,865 $ 3,339,875 $ 11,719,446
------------ ------------ ----------- ------------
Distributions to shareholders (Note 2) --
From net investment income $ (6,629,604) $ (2,817,049) $(2,637,658) $ (9,070,558)
In excess of net investment income (308,106) (64,469) (138,918) (405,313)
------------ ------------ ----------- ------------
Total distributions to shareholders $ (6,937,710) $ (2,881,518) $(2,776,576) $ (9,475,871)
------------ ------------ ----------- ------------
Transactions in shares of beneficial interest
(Note 3) -- Proceeds from sales of shares $ 11,143,966 $ 8,594,993 $ 7,348,950 $ 22,209,690
Net asset value of shares issued to
shareholders in payment of distributions
declared 3,945,866 1,307,677 1,419,234 4,998,528
Cost of shares redeemed (23,872,614) (10,077,180) (7,227,038) (33,336,822)
------------ ------------ ----------- ------------
Increase (decrease) in net assets from
Fund share transactions $ (8,782,782) $ (174,510) $ 1,541,146 $ (6,128,604)
------------ ------------ ----------- ------------
Net increase (decrease) in net assets $ (6,071,656) $ 76,837 $ 2,104,445 $ (3,885,029)
NET ASSETS:
At beginning of year 151,127,416 59,878,422 55,379,327 193,420,251
------------ ------------ ----------- ------------
At end of year $145,055,760 $ 59,955,259 $57,483,772 $189,535,222
============ ============ =========== ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN
EXCESS OF ) NET INVESTMENT INCOME INCLUDED
IN NET ASSETS AT END OF YEAR $ 86,480 $ 144,825 $ 94,023 $ (19,550)
============ ============ =========== ============
</TABLE>
See notes to financial statements
28
<PAGE> 29
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON ALABAMA FUND MARATHON ARKANSAS FUND
-------------------------------------------------- -------------------------------------------
YEAR ENDED YEAR ENDED
-------------------------------------------------- -------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
------------------------------ ----------------- --------------------------- -------------
1996 1995 1994*** 1993 1992** 1996 1995 1994*** 1993++
-------- -------- -------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $ 10.440 $ 10.210 $ 11.060 $10.340 $10.000 $10.250 $10.140 $10.910 $10.000
-------- -------- -------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.470 $ 0.479 $ 0.425 $ 0.475 $ 0.208 $ 0.450 $ 0.460 $ 0.431 $ 0.471
Net realized and unrealized
gain (loss) on
investments 0.030 0.244 (0.769) 0.837 0.385+++ (0.038) 0.132 (0.703) 1.025
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 0.500 $ 0.723 $ (0.344) $ 1.312 $ 0.593 $ 0.412 $ 0.592 $(0.272) $ 1.496
-------- -------- -------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.480) $ (0.479) $ (0.425) $(0.475) $(0.208) $(0.471) $(0.460) $(0.431) $(0.471)
In excess of net investment
income -- (0.014) (0.081) (0.117) (0.045) (0.001) (0.022) (0.067) (0.115)
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total distributions $ (0.480) $ (0.493) $ (0.506) $(0.592) $(0.253) $(0.472) $(0.482) $(0.498) $(0.586)
-------- -------- -------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 10.460 $ 10.440 $ 10.210 $11.060 $10.340 $10.190 $10.250 $10.140 $10.910
======== ======== ======== ======= ======= ======= ======= ======= =======
TOTAL RETURN (3) 4.85% 7.38% (3.18)% 13.09% 5.71% 4.05% 6.15% (2.53)% 15.00%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $101,692 $108,642 $105,553 $84,621 $21,105 $72,868 $80,823 $82,436 $59,205
Ratio of net expenses to
average daily net assets
(1)(4) 1.57% 1.51% 1.43%+ 1.37% 1.01%+ 1.56% 1.50% 1.17%+ 0.88%+
Ratio of net expenses to
average daily
net assets after
custodian fee reduction
(1) 1.52% -- -- -- -- 1.54% -- -- --
Ratio of net investment
income to average
daily net assets 4.44% 4.74% 4.35%+ 4.30% 4.49%+ 4.34% 4.67% 4.47%+ 4.27%+
PORTFOLIO TURNOVER (2) -- -- -- 15% 13% -- -- 5% 13%
</TABLE>
* For the year ended September 30, 1993 and for the period from the start of
business, May 1, 1992, to September 30, 1992 (for Marathon Alabama Fund), and
for the eleven months ended August 31, 1994 and for the period from the start
of business, October 2, 1992, to September 30, 1993 (for Marathon Arkansas
Fund), the operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser, or Administrator or both. Had such actions not been taken,
net investment income per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER
SHARE $0.462 $0.185 $0.409 $0.411
----- ----- ----- -------
----- ----- ----- -------
RATIOS(As a percentage of
average daily net assets):
Expenses (1) 1.49% 1.50%+ 1.40%+ 1.42% +
Net investment income 4.18% 4.00%+ 4.24%+ 3.73% +
** For the period from the start of business, May 1, 1992, to September 30, 1992.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business, October 2, 1992, to September 30, 1993.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of
the timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at
such time.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The portfolio turnover rate for the period since the Funds transferred
substantially all of their investable assets to their respective Portfolios is shown in the Portfolios' financial
statements which are included elsewhere in this report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund 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 August 31, 1995 have not been adjusted to reflect this change.
</TABLE>
See notes to financial statements
29
<PAGE> 30
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON GEORGIA FUND MARATHON KENTUCKY FUND
----------------------------------------------------- -----------------------------------------------------
YEAR ENDED YEAR ENDED
----------------------------------------------------- -----------------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
-------------------------------- ------------------ -------------------------------- ------------------
1996 1995 1994*** 1993 1992** 1996 1995 1994*** 1993 1992**
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 9.790 $ 9.800 $ 10.750 $ 10.120 $10.000 $ 9.990 $ 9.850 $ 10.780 $ 10.090 $10.000
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.451 $ 0.450 $ 0.413 $ 0.459 $ 0.380 $ 0.450 $ 0.458 $ 0.415 $ 0.462 $ 0.363
Net realized and
unrealized
gain (loss)
on investments 0.024 0.007++ (0.841) 0.776 0.215 (0.009)++ 0.163 (0.811) 0.820 0.192
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
Total income
(loss)
from
operations $ 0.475 $ 0.457 $ (0.428) $ 1.235 $ 0.595 $ 0.441 $ 0.621 $ (0.396) $ 1.282 $ 0.555
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
LESS
DISTRIBUTIONS:
From net
investment
income $ (0.455) $ (0.450) $ (0.413) $ (0.459) $(0.380) $ (0.450) $ (0.458) $ (0.415) $ (0.462) $(0.363)
In excess of net
investment
income -- (0.017) (0.065) (0.129) (0.095) (0.011) (0.023) (0.075) (0.125) (0.102)
From net
realized gain
on
investment
transactions -- -- -- (0.017) -- -- -- -- (0.005) --
In excess of net
realized gain
on
investment
transactions -- -- (0.044) -- -- -- -- (0.044) -- --
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
Total
distributions $ (0.455) $ (0.467) $ (0.522) $ (0.605) $(0.475) $ (0.461) $ (0.481) $ (0.534) $ (0.592) $(0.465)
-------- -------- -------- -------- ------- -------- -------- -------- -------- -------
NET ASSET VALUE,
end of year $ 9.810 $ 9.790 $ 9.800 $ 10.750 $10.120 $ 9.970 $ 9.990 $ 9.850 $ 10.780 $10.090
========== ========== ========== ========== ========= ========== ========== ========== ========== =========
TOTAL RETURN (3) 4.91% 4.90% (4.08)% 12.60% 5.85% 4.45% 6.61% (3.78)% 13.05% 5.45%
RATIOS/SUPPLEMENTAL
DATA*:
Net assets, end
of year (000
omitted) $106,992 $120,143 $134,481 $120,043 $42,156 $131,357 $143,106 $141,994 $120,093 $46,835
Ratio of net
expenses to
average daily
net assets
(1)(4) 1.58% 1.49% 1.41%+ 1.52% 1.13%+ 1.57% 1.52% 1.44%+ 1.50% 1.44%+
Ratio of net
expenses to
average daily
net assets
after
custodian fee
reduction (1) 1.52% -- -- -- -- 1.54% -- -- -- --
Ratio of net
investment
income to
average daily
net assets 4.55% 4.72% 4.39%+ 4.27% 4.72%+ 4.45% 4.74% 4.39%+ 4.29% 4.56%+
PORTFOLIO TURNOVER
(2) -- -- -- 20% 33% -- -- -- 21% 64%
</TABLE>
* For the period from the start of business, December 23, 1991, to September 30,
1992 (for Marathon Georgia Fund) and for the period from the start of business
December 23, 1991, to September 30, 1992 (for Marathon Kentucky Fund), the
operating expenses of the Funds and the Portfolios may reflect a reduction of
the investment adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, net
investment income per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE $0.341 $0.357
----- -----
----- -----
RATIOS(As a
percentage of
average
daily net
assets):
Expenses (1) 1.61%+ 1.52%+
Net investment
income 4.24%+ 4.48%+
** For the period from the start of business, December 23, 1991, to September 30, 1992.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of
the timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at
such time.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The portfolio turnover rate for the period since the Funds transferred
substantially all of their investable assets to their respective Portfolios is shown in the Portfolios' financial
statements which are included elsewhere in this report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund 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 August 31, 1995 have not been adjusted to reflect this change.
</TABLE>
See notes to financial statements
30
<PAGE> 31
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON LOUISIANA FUND MARATHON MARYLAND FUND
---------------------------------------------- --------------------------------------------------
YEAR ENDED YEAR ENDED
---------------------------------------------- --------------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
------------------------------ ------------- ------------------------------ -----------------
1996 1995 1994*** 1993** 1996 1995 1994*** 1993 1992++
------- ------- ------- ------------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $ 9.980 $10.010 $11.130 $10.000 $ 10.230 $ 10.070 $ 11.070 $10.290 $10.000
------- ------- ------- ------------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.486 $ 0.487 $0.447 $ 0.478 $ 0.464 $ 0.476 $ 0.428 $ 0.466 $ 0.303
Net realized and
unrealized gain (loss)
on investments (0.016) (0.006)+++ (0.937 ) 1.234 0.086 0.169 (0.922) 0.890 0.375+++
------- ------- ------- ------------- -------- -------- -------- ------- -------
Total income (loss)
from operations $ 0.470 $ 0.481 $(0.490) $ 1.712 $ 0.550 $ 0.645 $ (0.494) $ 1.356 $ 0.678
------- ------- ------- ------------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.490) $(0.487) $(0.447) $(0.478) $ (0.480) $ (0.476) $ (0.428) $(0.466) $(0.303)
In excess of net
investment income -- (0.024) (0.074 ) (0.104) -- (0.009) (0.070) (0.110) (0.085)
In excess of net realized
gain on investment
transactions -- -- (0.109 ) -- -- -- (0.008) -- --
------- ------- ------- ------------- -------- -------- -------- ------- -------
Total distributions $(0.490) $(0.511) $(0.630) $(0.582) $ (0.480) $ (0.485) $ (0.506) $(0.576) $(0.388)
------- ------- ------- ------------- -------- -------- -------- ------- -------
NET ASSET VALUE, end of
year $ 9.960 $ 9.980 $10.010 $11.130 $ 10.300 $ 10.230 $ 10.070 $11.070 $10.290
========= ========= ========== ============ ========== ========== ========== ========= =========
TOTAL RETURN (3) 4.77% 5.08% (4.56% ) 17.26% 5.44% 6.71% (4.56%) 13.61% 6.65%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $32,994 $31,836 $29,020 $17,935 $109,243 $113,826 $116,721 $95,226 $29,180
Ratio of net expenses to
average daily net
assets (1)(4) 1.41% 1.31% 1.08% + 1.07%+ 1.57% 1.50% 1.43%+ 1.43% 1.30%+
Ratio of net expenses to
average daily
net assets after
custodian fee reduction
(1) 1.34% -- -- -- 1.55% -- -- -- --
Ratio of net investment
income to average daily
net assets 4.82% 4.97% 4.62% + 4.27%+ 4.46% 4.82% 4.44%+ 4.28% 4.25%+
PORTFOLIO TURNOVER (2) -- -- 14% 86% -- -- -- 12% 3%
</TABLE>
* For the years ended August 31, 1996 and 1995, the eleven months ended August
31, 1994 and the period from the start of business, October 2, 1992, to
September 30, 1993 (for Marathon Louisiana Fund), and for the year ended
September 30, 1993 and for the period from the start of business, February 3,
1992, to September 30, 1992 (for Marathon Maryland Fund), the operating
expenses of the Funds and the Portfolios may reflect a reduction of the
investment adviser fee, an allocation of expenses to the Investment Adviser or
Administrator, or both. Had such actions not been taken, net investment income
per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER
SHARE $0.474 $0.470 $0.412 $0.401 $0.461 $0.280
===== ===== ====== ======= ===== =====
RATIOS (As a percentage of
average daily net
assets):
Expenses (1)(4) 1.53% 1.42% 1.44% + 1.76% + 1.48% 1.62%+
Expenses after custodian
fee reduction (1) 1.45% -- -- -- -- --
Net investment income 4.70% 4.86% 4.26% + 3.58% + 4.23% 3.93%+
** For the period from the start of business, October 2, 1992, to September 30, 1993.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business, February 3, 1992, to September 30, 1992.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of
the timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at
such time.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The portfolio turnover rate for the period since the Funds transferred
substantially all of their investable assets to their respective Portfolios is shown in the Portfolios' financial
statements which are included elsewhere in this report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund 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 August 31, 1995 have not been adjusted to reflect this change.
</TABLE>
See notes to financial statements
31
<PAGE> 32
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON MISSOURI FUND MARATHON NORTH CAROLINA FUND
----------------------------------------------- ------------------------------------------------------
YEAR ENDED YEAR ENDED
----------------------------------------------- ------------------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
--------------------------- ----------------- --------------------------------- ------------------
1996 1995 1994*** 1993 1992** 1996 1995 1994*** 1993 1992++
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $10.510 $10.240 $11.250 $10.400 $10.000 $ 9.960 $ 9.970 $ 10.940 $ 10.300 $10.000
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.476 $ 0.477 $ 0.423 $ 0.470 $ 0.200 $ 0.452 $ 0.466 $ 0.423 $ 0.468 $ 0.456
Net realized and
unrealized gain
(loss)
on investments 0.003 0.289 (0.904) 1.005 0.455 0.026 0.011+++ (0.895) 0.794 0.423+++
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
Total income
(loss) from
operations $ 0.479 $ 0.766 $(0.481) $ 1.475 $ 0.655 $ 0.478 $ 0.477 $ (0.472) $ 1.262 $ 0.879
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.476) $(0.477) $(0.423) $(0.470) $(0.200) $ (0.455) $ (0.466) $ (0.423) $ (0.468) $(0.456)
In excess of net
investment income (0.003) (0.019) (0.084) (0.128) (0.055) (0.013) (0.021) (0.075) (0.120) (0.123)
In excess of net
realized gain on
investment
transactions -- -- (0.022) (0.027) -- -- -- -- (0.034) --
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
Total
distributions $(0.479) $(0.496) $(0.529) $(0.625) $(0.255) $ (0.468) $ (0.487) $ (0.498) $ (0.622) $(0.579)
------- ------- ------- ------- ------- -------- -------- -------- -------- -------
NET ASSET VALUE, end
of year $10.510 $10.510 $10.240 $11.250 $10.400 $ 9.970 $ 9.960 $ 9.970 $ 10.940 $10.300
======= ======= ======= ======= ======= ======== ======== ======== ======== =======
TOTAL RETURN (3) 4.60% 7.82% (4.33)% 14.66% 6.33% 4.83% 5.03% (4.40)% 12.69% 8.75%
RATIOS/SUPPLEMENTAL
DATA*:
Net assets, end of
year (000 omitted) $82,385 $89,811 $91,227 $76,653 $25,225 $169,889 $188,450 $192,667 $173,828 $71,733
Ratio of net
expenses to
average daily net
assets (1)(4) 1.56% 1.53% 1.49%+ 1.52% 1.32%+ 1.59% 1.51% 1.42%+ 1.52% 1.35%+
Ratio of net
expenses to
average daily net
assets after
custodian fee
reduction (1) 1.54% -- -- -- -- 1.54% -- -- -- --
Ratio of net
investment income
to average daily
net assets 4.47% 4.72% 4.30%+ 4.23% 4.31%+ 4.47% 4.78% 4.43%+ 4.34% 4.54%+
PORTFOLIO TURNOVER (2) -- -- -- 14% 21% -- -- -- 16% 52%
</TABLE>
* For the year ended September 30, 1993 and for the period from the start of
business, May 1, 1992, to September 30, 1992 (for Marathon Missouri Fund), and
for the period from the start of business, October 23, 1991, to September 30,
1992 (for Marathon North Carolina Fund), the operating expenses of the Funds
and the Portfolios may reflect a reduction of the investment adviser fee, an
allocation of expenses to the Investment Adviser or Administrator, or both.
Had such actions not been taken, net investment income per share and the
ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
PER SHARE $0.467 $0.192 $0.434
===== ===== =====
RATIOS(As a percentage
of average daily
net assets):
Expenses (1) 1.55% 1.49%+ 1.57%+
Net investment
income 4.20% 4.14%+ 4.32%+
** For the period from the start of business, May 1, 1992, to September 30, 1992.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business, October 23, 1991, to September 30, 1992.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of
the timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at
such time.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The portfolio turnover rate for the period since the Funds transferred
substantially all of their investable assets to their respective Portfolios is shown in the Portfolios' financial
statements which are included elsewhere in this report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund 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 August 31, 1995 have not been adjusted to reflect this change.
</TABLE>
See notes to financial statements
32
<PAGE> 33
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON OREGON FUND MARATHON SOUTH CAROLINA FUND
--------------------------------------------------- -------------------------------------------
YEAR ENDED YEAR ENDED
--------------------------------------------------- -------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
------------------------------ ------------------ --------------------------- -------------
1996 1995 1994*** 1993 1992** 1996 1995 1994*** 1993++
-------- -------- -------- -------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $ 10.31 $ 10.090 $ 11.130 $ 10.270 $10.000 $10.000 $ 9.940 $10.890 $10.000
-------- -------- -------- -------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income $ 0.450 $ 0.455 $ 0.415 $ 0.459 $ 0.351 $ 0.467 $ 0.460 $ 0.408 $ 0.461
Net realized and unrealized
gain
(loss) on investments (0.061) 0.241 (0.869) 0.983 0.368 0.021 0.071 (0.870) 0.986
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 0.389 $ 0.696 $ (0.454) $ 1.442 $ 0.719 $ 0.488 $ 0.531 $(0.462) $ 1.447
-------- -------- -------- -------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.457) $ (0.455) $ (0.415) $ (0.459) $(0.351) $(0.468) $(0.460) $(0.408) $(0.461)
In excess of net investment
income (0.002) (0.021) (0.078) (0.117) (0.098) -- (0.011) (0.080) (0.096)
From net realized gain on
investment transactions -- -- (0.093) (0.006) -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total distributions $ (0.459) $ (0.476) $ (0.586) $ (0.582) $(0.449) $(0.468) $(0.471) $(0.488) $(0.557)
-------- -------- -------- -------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 10.240 $ 10.310 $ 10.090 $ 11.130 $10.270 $10.020 $10.000 $ 9.940 $10.890
======== ======== ======== ======== ======= ======= ======= ======= =======
TOTAL RETURN (3) 3.80% 7.22% (4.21)% 14.47% 7.10% 4.92% 5.64% (4.33)% 14.50%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of year
(000 omitted) $128,580 $145,056 $151,127 $128,229 $41,703 $57,217 $59,955 $59,878 $43,169
Ratio of net expenses to
average daily
net assets (1)(4) 1.56% 1.53% 1.43%+ 1.55% 1.47%+ 1.60% 1.49% 1.36%+ 1.07%+
Ratio of net expenses to
average daily
net assets after
custodian fee reduction
(1) 1.53% -- -- -- -- 1.58% -- -- --
Ratio of net investment
income to
average daily net assets 4.33% 4.59% 4.28%+ 4.22% 4.27%+ 4.60% 4.77% 4.27%+ 4.22%+
PORTFOLIO TURNOVER (2) -- -- -- 23% 44% -- -- 3% 13%
</TABLE>
* For the period from the start of business, December 24, 1991, to September 30,
1992 (for Marathon Oregon Fund), and for the period from the start of
business, October 2, 1992, to September 30, 1993 (for Marathon South Carolina
Fund), the operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been taken,
net investment income per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER
SHARE $0.338 $0.421
===== =====
RATIOS(As a percentage of
average daily net
assets):
Expenses (1) 1.63%+ 1.44% +
Net investment income 4.11%+ 3.85% +
** For the period from the start of business, December 24, 1991, to September 30, 1992.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business, October 2, 1992, to September 30, 1993.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making
investments directly in securities. The portfolio turnover rate for the period since the Funds transferred
substantially all of their investable assets to their respective Portfolios is shown in the Portfolios' financial
statements which are included elsewhere in this report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund 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 August 31, 1995 have not been adjusted to reflect this change.
</TABLE>
See notes to financial statements
33
<PAGE> 34
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARATHON TENNESSEE FUND MARATHON VIRGINIA FUND
----------------------------------------------- -------------------------------------------------------------
YEAR ENDED YEAR ENDED
----------------------------------------------- -------------------------------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31, SEPTEMBER 30,
--------------------------- ----------------- ------------------------------ ----------------------------
1996 1995 1994*** 1993 1992** 1996 1995 1994*** 1993 1992 1991++
------- ------- ------- ------- ------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
beginning of
year $10.110 $10.020 $11.070 $10.010 $10.000 $ 10.260 $ 10.120 $ 11.060 $ 10.460 $10.200 $10.000
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS)
FROM
OPERATIONS:
Net
investment
income $ 0.457 $ 0.468 $ 0.426 $ 0.466 $ 0.040 $ 0.471 $ 0.479 $ 0.438 $ 0.483 $ 0.526 $ 0.087
Net realized
and
unrealized
gain (loss)
on
investments 0.059 0.115 (0.848) 1.158 0.027+++ 0.006 0.161 (0.864) 0.762 0.385 0.220+++
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
income
(loss)
from
operations $ 0.516 $ 0.583 $(0.422) $ 1.624 $ 0.067 $ 0.477 $ 0.640 $ (0.426) $ 1.245 $ 0.911 $ 0.307
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS
DISTRIBUTIONS:
From net
investment
income $(0.475) $(0.468) $(0.426) $(0.466) $(0.040) $ (0.471) $ (0.479) $ (0.438) $ (0.483) $(0.526) $(0.087)
In excess of
net
investment
income (0.001) (0.025) (0.071) (0.098) (0.017) (0.006) (0.021) (0.076) (0.130) (0.120) (0.020)
From net
realized
gain on
investment
transactions -- -- (0.094) -- -- -- -- -- (0.022) (0.005) --
In excess of
net
realized
gain on
investment
transactions -- -- (0.037) -- -- -- -- -- (0.010) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $(0.476) $(0.493) $(0.628) $(0.564) $(0.057) $ (0.477) $ (0.500) $ (0.514) $ (0.645) $(0.651) $(0.107)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET
VALUE, end of
year $10.150 $10.110 $10.020 $11.070 $10.010 $ 10.260 $ 10.260 $ 10.120 $ 11.060 $10.460 $10.200
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN
(3) 5.16% 6.12% (3.93)% 16.97% 0.01% 4.67% 6.62% (3.95%) 12.33% 9.16% 2.82%
RATIOS/SUPPLEMENTAL
DATA*:
Net assets,
end of year
(000
omitted) $54,533 $57,484 $55,379 $39,648 $ 3,475 $175,918 $189,535 $193,420 $175,426 $72,629 $11,081
Ratio of net
expenses to
average
daily net
assets
(1)(4) 1.53% 1.47% 1.37%+ 1.30% 1.00%+ 1.56% 1.50% 1.44%+ 1.52% 1.36% 1.27%+
Ratio of net
expenses to
average
daily net
assets
after
custodian
fee
reduction
(1) 1.51% -- -- -- -- 1.53% -- -- -- -- --
Ratio of net
investment
income to
average
daily net
assets 4.45% 4.77% 4.44%+ 4.24% 2.91%+ 4.52% 4.81% 4.51%+ 4.42% 4.86% 4.47%+
PORTFOLIO
TURNOVER (2) -- -- -- 28% 0% -- -- -- 27% 85% 10%
</TABLE>
* For the year ended September 30, 1993 and for the period from the start of
business, August 25, 1992, to September 30, 1992 (for Marathon Tennessee
Fund), and for the year ended September 30, 1992 and for the period from the
start of business, July 26, 1991, to September 30, 1991 (for Marathon Virginia
Fund), the operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been taken,
net investment income per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT
INCOME PER
SHARE $0.432 $0.025 $0.501 $0.079
====== ====== ===== ======
RATIOS(As a
percentage
of
average
daily
net
assets):
Expenses
(1)(4) 1.61% 2.10%+ 1.59% 1.68%+
Net
investment
income 3.93% 1.81%+ 4.63% 4.06%+
** For the period from the start of business, August 25, 1992, to September 30, 1992.
*** For the eleven months ended August 31, 1994.
+ Annualized.
++ For the period from the start of business, July 26, 1991, to September 30, 1991.
+++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the timing
of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at such time.
(1) Includes each Fund's share of its corresponding Portfolio's allocated expenses subsequent to February 1, 1993.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Funds were making investments directly
in securities. The portfolio turnover rate for the period since the Funds transferred substantially all of their investable
assets to their respective Portfolios is shown in the Portfolios' financial statements which are included elsewhere in this
report.
(3) 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.
(4) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting requirements. The
new reporting guidelines require each Fund 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 August 31, 1995 have not been
adjusted to reflect this change.
</TABLE>
See notes to financial statements
34
<PAGE> 35
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Municipals Trust (the Trust) is an entity of the type commonly known
as a Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
presently consists of sixty-three Funds, twelve of the non-diversified funds are
included in these financial statements. They include EV Marathon Alabama
Municipals Fund ("Marathon Alabama Fund"), EV Marathon Arkansas Municipals Fund
("Marathon Arkansas Fund"), EV Marathon Georgia Municipals Fund ("Marathon
Georgia Fund"), EV Marathon Kentucky Municipals Fund ("Marathon Kentucky Fund"),
EV Marathon Louisiana Municipals Fund ("Marathon Louisiana Fund"), EV Marathon
Maryland Municipals Fund ("Marathon Maryland Fund"), EV Marathon Missouri
Municipals Fund ("Marathon Missouri Fund"), EV Marathon North Carolina
Municipals Fund ("Marathon North Carolina Fund"), EV Marathon Oregon Municipals
Fund ("Marathon Oregon Fund"), EV Marathon South Carolina Municipals Fund
("Marathon South Carolina Fund"), EV Marathon Tennessee Municipals Fund
("Marathon Tennessee Fund") and EV Marathon Virginia Municipals Fund ("Marathon
Virginia Fund"). Each Fund invests all of its investable assets in interests in
a separate corresponding open-end management investment company (a Portfolio), a
New York Trust, having the same investment objective as its corresponding Fund.
The Marathon Alabama Fund invests its assets in the Alabama Municipals
Portfolio, the Marathon Arkansas Fund invests its assets in the Arkansas
Municipals Portfolio, the Marathon Georgia Fund invests its assets in the
Georgia Municipals Portfolio, the Marathon Kentucky Fund invests its assets in
the Kentucky Municipals Portfolio, the Marathon Louisiana Fund invests its
assets in the Louisiana Municipals Portfolio, the Marathon Maryland Fund invests
its assets in the Maryland Municipals Portfolio, the Marathon Missouri Fund
invests its assets in the Missouri Municipals Portfolio, the Marathon North
Carolina Fund invests its assets in the North Carolina Municipals Portfolio, the
Marathon Oregon Fund invests its assets in the Oregon Municipals Portfolio, the
Marathon South Carolina Fund invests its assets in the South Carolina Municipals
Portfolio, the Marathon Tennessee Fund invests its assets in the Tennessee
Municipals Portfolio and the Marathon Virginia Fund invests its assets in the
Virginia Municipals Portfolio. The value of each Fund's investment in its
corresponding Portfolio reflects the Fund's proportionate interest in the net
assets of that Portfolio (94.2%, 98.6%, 98.5%, 99.1%, 94.4%, 99.1%, 97.2%,
91.1%, 99.4%, 98.5%, 97.6% and 99.4%, at August 31, 1996, for the Marathon
Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund, Marathon Kentucky
Fund, Marathon Louisiana Fund, Marathon Maryland Fund, Marathon Missouri Fund,
Marathon North Carolina Fund, Marathon Oregon Fund, Marathon South Carolina
Fund, Marathon Tennessee Fund and Marathon Virginia Fund, respectively). The
performance of each Fund is directly affected by the performance of its
corresponding Portfolio. The financial statements of each Portfolio, including
the portfolio of investments, are included elsewhere in this report and should
be read in conjunction with each Fund's financial statements. The following is a
summary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATION--Valuation of securities by the Portfolios is discussed
in Note 1A of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME--Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with generally
accepted accounting principles.
C. FEDERAL TAXES--Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At August 31, 1996, the Funds, for
federal income tax purposes had capital loss carryovers which will reduce
taxable income arising from future net realized gain 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 Funds of any liability for federal income or excise tax.
35
<PAGE> 36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The amounts and expiration dates of the capital loss carryovers are as follows:
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRES
- ----------------------------- ---------- ------------------
<S> <C> <C>
Marathon Alabama Fund $ 826,540 August 31, 2004
1,877,237 August 31, 2003
362,951 August 31, 2002
1,050 September 30, 2000
Marathon Arkansas Fund 1,802,164 August 31, 2004
561,676 August 31, 2003
241,061 August 31, 2002
Marathon Georgia Fund 6,622,861 August 31, 2004
1,197,263 August 31, 2003
151,432 August 31, 2002
Marathon Kentucky Fund 2,909,053 August 31, 2004
1,058,248 August 31, 2003
Marathon Louisiana Fund 1,622,700 August 31, 2004
278,670 August 31, 2003
Marathon Maryland Fund 1,308,929 August 31, 2004
1,208,914 August 31, 2003
Marathon Missouri Fund 1,702,533 August 31, 2004
435,519 August 31, 2003
Marathon North Carolina Fund 8,163,670 August 31, 2004
4,191,384 August 31, 2003
451,305 August 31, 2002
63,556 September 30, 2001
Marathon Oregon Fund 4,197,676 August 31, 2004
468,881 August 31, 2003
Marathon South Carolina Fund 2,757,057 August 31, 2004
1,317,687 August 31, 2003
74,010 August 31, 2002
Marathon Tennessee Fund 1,694,580 August 31, 2004
195,240 August 31, 2003
Marathon Virginia Fund 7,497,842 August 31, 2004
2,423,778 August 31, 2003
</TABLE>
Additionally, at August 31, 1996, net capital losses of $980,152, $207,394 and
$608,261 for the Marathon Kentucky Fund, Marathon Louisiana Fund, and Marathon
Oregon Fund, respectively, attributable to security transactions incurred after
October 31, 1995, are treated as arising on the first day of the Funds' next
taxable year.
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includable by shareholders as
gross income for federal income tax purposes because each Fund and Portfolio
intend to meet certain requirements of the Internal Revenue Code applicable to
regulated investment companies which will enable the Funds to pay tax-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 each Fund in connection
with its organization, including registration costs, are being amortized on the
straight-line basis over five years.
E. EXPENSE REDUCTION--Investors Bank & Trust Company (IBT), serves as custodian
to the Funds and the Portfolios. Prior to November 10, 1995, IBT was an
affiliate of EVM. Pursuant to the respective custodian agreements, IBT receives
a fee reduced by credits which are determined based on the average cash balances
the Funds or the Portfolios maintain with IBT. All significant credit balances
used to reduce each Fund's custodian fees are reported as a reduction of
expenses in the statements of operations.
F. 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.
G. OTHER--Investment transactions are accounted for on a trade date basis.
36
<PAGE> 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of each 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 a Fund at the net
asset value as of the ex-dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholders, in cash. The Funds
distinguish between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial 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. During
the year ended August 31, 1996, the following reclassifications were made due to
permanent differences between book and tax accounting for certain distributions
related to capital gains:
<TABLE>
<CAPTION>
MARATHON
MARATHON NORTH MARATHON
LOUISIANA CAROLINA VIRGINIA
FUND FUND FUND
-------- -------- --------
<S> <C> <C> <C>
INCREASE/(DECREASE)
Accumulated net realized loss on investment and
financial futures transactions 2,987 2,827 22,985
Accumulated distributions in excess of net investment
income -- -- (250 )
Paid-in capital (2,987) (2,827) (22,735 )
</TABLE>
The tax treatment of distributions for the calendar year 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 Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
MARATHON ALABAMA MARATHON ARKANSAS
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 391,938 1,241,529 274,418 685,186
Issued to shareholders electing to
receive payments of distributions in
Fund shares 241,707 262,695 159,265 189,639
Redemptions (1,321,649) (1,432,449) (1,168,773) (1,116,643)
---------- ---------- ---------- ----------
Net increase (decrease) (688,004 ) 71,775 (735,090 ) (241,818 )
============= ============= ============= =============
</TABLE>
37
<PAGE> 38
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
MARATHON GEORGIA MARATHON KENTUCKY
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 373,857 1,118,366 561,028 1,296,010
Issued to shareholders electing to
receive payments of distributions in
Fund shares 244,086 319,177 332,092 383,359
Redemptions (1,990,386) (2,878,588) (2,048,388) (1,763,810)
---------- ---------- ---------- ----------
Net decrease (1,372,443) (1,441,045) (1,155,268) (84,441 )
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MARATHON LOUISIANA MARATHON MARYLAND
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 395,341 537,770 812,572 1,391,822
Issued to shareholders electing to
receive payments of distributions
in Fund shares 77,363 80,245 271,666 298,558
Redemptions (350,233 ) (327,579 ) (1,603,403) (2,153,497)
---------- ---------- ---------- ----------
Net increase (decrease) 122,471 290,436 (519,165 ) (463,117 )
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MARATHON MISSOURI MARATHON NORTH CAROLINA
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 356,070 712,633 703,283 1,686,102
Issued to shareholders electing to
receive payments of distributions
in Fund shares 185,830 219,344 412,501 479,532
Redemptions (1,244,942) (1,297,726) (2,988,053) (2,567,819)
---------- ---------- ---------- ----------
Net decrease (703,042 ) (365,749 ) (1,872,269) (402,185 )
============= ============= ============= =============
</TABLE>
38
<PAGE> 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
MARATHON OREGON MARATHON SOUTH CAROLINA
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 490,291 1,131,231 462,452 884,786
Issued to shareholders electing to
receive payments of distributions
in Fund shares 332,112 397,878 119,696 134,341
Redemptions (2,346,208) (2,436,297) (870,124 ) (1,047,426)
---------- ---------- ---------- ----------
Net decrease (1,523,805) (907,188 ) (287,976 ) (28,299 )
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MARATHON TENNESSEE MARATHON VIRGINIA
FUND FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales 334,666 754,435 770,506 2,254,165
Issued to shareholders electing to
receive payments of distributions
in Fund shares 130,351 144,886 419,968 501,177
Redemptions (779,131 ) (743,561 ) (2,518,984) (3,388,505)
---------- ---------- ---------- ----------
Net increase (decrease) (314,114 ) 155,760 (1,328,510) (633,163 )
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
(4) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 2 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report. Certain of the officers and Trustees of the Funds and
Portfolios are officers and directors/trustees of these organizations. Except as
to Trustees of the Funds and the Portfolios who are not members of EVM's or
BMR's organization, officers and Trustees receive remuneration for their
services to each Fund out of the investment adviser fee earned by BMR.
39
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the Plans) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plans require the Funds to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365 of 0.75% of each Fund's daily net assets, for providing ongoing
distribution services and facilities to the respective Fund. A Fund will
automatically discontinue payments to EVD during any period in which there are
no outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 5% of the aggregate amount received by the Fund for shares sold plus (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD
reduced by the aggregate amount of contingent deferred sales charges (Note 6)
and amounts theretofore paid to EVD. The amount payable to EVD with respect to
each day is accrued on such day as a liability of each Fund and, accordingly,
reduces the Fund's net assets. For the year ended August 31, 1996, Marathon
Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund, Marathon Kentucky
Fund, Marathon Louisiana Fund, Marathon Maryland Fund, Marathon Missouri Fund,
Marathon North Carolina Fund, Marathon Oregon Fund, Marathon South Carolina
Fund, Marathon Tennessee Fund and Marathon Virginia Fund, paid or accrued
$805,078, $585,185, $869,639, $1,040,081, $247,330, $852,487, $657,054,
$1,373,171, $1,047,054, $452,132, $425,503 and $1,402,507, respectively, to or
payable to EVD, representing 0.75% of average daily net assets. At August 31,
1996, the amount of Uncovered Distribution Charges of EVD calculated under the
Plans for Marathon Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund,
Marathon Kentucky Fund, Marathon Louisiana Fund, Marathon Maryland Fund,
Marathon Missouri Fund, Marathon North Carolina Fund, Marathon Oregon Fund,
Marathon South Carolina Fund, Marathon Tennessee Fund and Marathon Virginia Fund
were approximately $3,631,000, $2,777,000, $3,759,000, $4,511,000, $1,362,000,
$3,946,000, $2,856,000, $5,905,000, $4,465,000, $2,245,000, $2,037,000 and
$5,877,000, respectively.
In addition, the Plans authorize the Funds to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets for any fiscal year. The
Trustees have initially implemented the Plans by authorizing the Funds to make
quarterly service fee payments to the Principal Underwriter and Authorized Firms
in amounts not expected to exceed 0.20% per annum of each Fund's average daily
net assets based on the value of Fund shares sold by such persons and remaining
outstanding for at least one year. For the year ended August 31, 1996, Marathon
Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund, Marathon Kentucky
Fund, Marathon Louisiana Fund, Marathon Maryland Fund, Marathon Missouri Fund,
Marathon North Carolina Fund, Marathon Oregon Fund, Marathon South Carolina
Fund, Marathon Tennessee Fund and Marathon Virginia Fund paid or accrued service
fees to or payable to EVD in the amount of $188,442, $130,268, $196,317,
$244,894, $56,538, $185,757, $150,023, $328,294, $236,226, $99,151, $92,921 and
$317,860, respectively. Service fee payments are made for personal services
and/or maintenance of shareholder accounts. Service fees paid to EVD and
authorized firms are separate and distinct from the sales commissions and
distribution fees payable by each Fund to EVD, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD.
Certain officers and Trustees of the Fund are officers or directors of EVD.
40
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gains distributions. The CDSC is imposed at declining rates that begin at 5% in
the case of redemptions in the first and second year after purchase, declining
one percentage point each subsequent year. No CDSC is levied on shares which
have been sold to EVD or its affiliates or to their respective employees. CDSC
charges are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under each Fund's Distribution Plan (See Note 5). CDSC charges
received when no Uncovered Distribution Charges exist will be credited to the
Fund. EVD received approximately $363,000, $312,000, $475,000, $532,000,
$88,000, $445,000, $304,000, $742,000, $645,000, $226,000, $214,000 and $604,000
of CDSC paid by shareholders of Marathon Alabama Fund, Marathon Arkansas Fund,
Marathon Georgia Fund, Marathon Kentucky Fund, Marathon Louisiana Fund, Marathon
Maryland Fund, Marathon Missouri Fund, Marathon North Carolina Fund, Marathon
Oregon Fund, Marathon South Carolina Fund, Marathon Tennessee Fund and Marathon
Virginia Fund, respectively, for the year ended August 31, 1996.
- --------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in each Fund's investment in its corresponding Portfolio
for the year ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
MARATHON MARATHON MARATHON MARATHON
ALABAMA ARKANSAS GEORGIA KENTUCKY
FUND FUND FUND FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Increases $ 5,044,395 $ 2,955,286 $ 4,234,464 $ 6,172,426
Decreases 18,039,671 14,942,420 24,373,109 25,650,196
</TABLE>
<TABLE>
<CAPTION>
MARATHON
MARATHON MARATHON MARATHON NORTH
LOUISIANA MARYLAND MISSOURI CAROLINA
FUND FUND FUND FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Increases $ 4,328,268 $ 8,943,513 $ 3,917,640 $ 7,646,148
Decreases 5,007,024 20,622,013 16,092,754 37,042,872
</TABLE>
<TABLE>
<CAPTION>
MARATHON
MARATHON SOUTH MARATHON MARATHON
OREGON CAROLINA TENNESSEE VIRGINIA
FUND FUND FUND FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Increases $ 5,514,182 $ 4,887,283 $ 3,619,285 $ 8,701,044
Decreases 28,955,747 11,235,862 10,026,278 33,152,364
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE> 42
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF EATON VANCE MUNICIPALS TRUST:
We have audited the accompanying statements of assets and liabilities of EV
Marathon Alabama Municipals Fund, EV Marathon Arkansas Municipals Fund, EV
Marathon Georgia Municipals Fund, EV Marathon Kentucky Municipals Fund, EV
Marathon Louisiana Municipals Fund, EV Marathon Maryland Municipals Fund, EV
Marathon Missouri Municipals Fund, EV Marathon North Carolina Municipals Fund,
EV Marathon Oregon Municipals Fund, EV Marathon South Carolina Municipals Fund,
EV Marathon Tennessee Municipals Fund and EV Marathon Virginia Municipals Fund
(the Funds) (certain of the series of Eaton Vance Municipals Trust) as of August
31, 1996, the related statements of operations for the year then ended, and the
statements of changes in net assets for each of the years ended August 31, 1996
and 1995 and the financial highlights for each of the years in the five-year
period ended August 31, 1996 and the period from the start of business to
September 30, 1991 for the EV Marathon Virginia Municipals Fund. 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, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the aforementioned
funds of Eaton Vance Municipals Trust at August 31, 1996, the results of their
operations, the changes in their net assets, and their financial highlights for
the respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
OCTOBER 1, 1996
42
<PAGE> 43
- --------------------------------------------------------------------------------
Alabama Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRIC
UTILITIES - 1.6%
Baa1 BBB+ $ 180 Puerto Rico Electric
Power Authority, 7.00%,
7/1/07 $ 191,696
Baa1 BBB+ 500 Puerto Rico Electric
Power Authority, 6.375%,
7/1/24 511,845
Baa1 BBB+ 1,000 Puerto Rico Electric
Power Authority, 6.00%,
7/1/10 1,003,750
------------
$ 1,707,291
------------
ESCROWED - 5.5%
NR AA $ 500 Birmingham, Alabama
Improvement Warrants,
6.60%, 7/1/17 $ 546,590
NR BBB 2,000 Gadsen East, Alabama
Medical Clinic Board
(Baptist Hospital),
7.80%, 11/1/21 2,300,300
NR BBB 350 Gadsen East, Alabama
Medical Clinic Board
(Baptist Hospital),
7.60%, 11/1/08 399,392
A NR 250 Montgomery, Alabama
(Jackson Hospital),
7.00%, 3/1/15 277,197
Baa1 A- 320 Puerto Rico Electric
Power, 7.00%, 7/1/07 346,784
Aaa AAA 250 Tuscaloosa, Alabama
Limited
Obligation-Capital
Outlay Warrants (AMBAC),
6.50%, 2/1/15 264,235
Aa NR 1,600 University of Alabama-
Birmingham Medical &
Educational Foundation
Housing, 7.00%, 12/1/19 1,743,312
------------
$ 5,877,810
------------
GENERAL OBLIGATIONS - 2.2%
A1 AA $1,000 Birmingham, Alabama
U.T.G.O., 5.75%, 6/1/16 $ 979,110
Baa1 A 1,000 Puerto Rico General
Obligation, 6.50%,
7/1/23 1,055,580
NR NR 250 Virgin Islands, 7.25%,
10/1/18 263,378
------------
$ 2,298,068
------------
HOSPITALS - 14.0%
Aa AA $2,250 Alabama Special Care
(Daughters of Charity),
5.00%, 11/1/25 $ 1,922,558
NR BBB 3,000 Alexander, Alabama
Special Care (Russell
Hospital),
6.00%, 12/1/22 2,762,550
Baa BBB- 1,000 Baldwin, Alabama (Thomas
Hospital), 6.75%, 4/1/21 986,950
Baa NR 1,000 Cullman, Alabama Medical
Clinic Board (Cullman
Regional Medical
Center), 6.50%, 2/15/23 971,700
Baa1 NR 2,000 Jasper, Alabama Medical
Clinic Board (Walker
Regional Medical
Center), 6.40%, 7/1/11 1,988,420
Baa1 NR 3,550 Jasper, Alabama Medical
Clinic Board (Walker
Regional Medical
Center), 6.375%, 7/1/18
(2) 3,453,901
Baa BBB 2,000 Marshall, Alabama (Boaz-
Albertville Medical
Center), 7.00%, 1/1/20 2,004,080
A A 745 Montgomery, Alabama
Medical Clinic Board
(Jackson Hospital),
7.00%, 3/1/15 773,630
------------
$ 14,863,789
------------
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION
CONTROL REVENUE - 12.9%
Baa1 BBB $1,200 Courtland, Alabama
(Champion International
Corporation), 7.20%,
12/1/13 $ 1,290,228
Baa1 BBB 800 Courtland, Alabama
(Champion International
Corporation) (AMT),
7.00%, 6/1/22 830,800
Baa1 BBB 2,000 Courtland, Alabama
(Champion International
Corporation) (AMT),
6.50%, 9/1/25 1,951,600
Baa3 BBB- 2,000 Mobile, Alabama (Mobile
Energy), 6.95%, 1/1/20 2,057,560
A2 NR 1,000 PR IM&E (American Home
Products), 5.10%,
12/1/18 894,690
Baa3 BB+ 1,000 Puerto Rico Port
Authority (American
Airlines) (AMT), 6.30%,
6/1/23 999,870
Baa3 BB+ 2,780 Puerto Rico Port
Authority (American
Airlines) (AMT), 6.25%,
6/1/26 2,761,068
A3 A- 1,000 Selma, Alabama
(International Paper
Oil) (AMT), 6.00%,
12/1/17 959,370
A2 A+ 2,000 Tallahasse, Alabama
(United Tech), 6.10%,
8/1/14 1,989,080
------------
$ 13,734,266
------------
</TABLE>
43
<PAGE> 44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED EDUCATION - 8.7%
Aaa AAA $1,000 Alabama A&M University
(MBIA), 6.375%, 11/1/09 $ 1,059,930
Aaa AAA 1,770 Alabama A&M University
(MBIA), 5.75%, 11/1/14 1,756,052
Aaa Aaa 2,000 Alabama State University
Tuition & Fee (MBIA),
5.80%, 12/1/20 1,939,080
Aaa AAA 4,000 University of Alabama
Student Housing (MBIA),
5.00%, 6/1/16 3,587,400
Aaa AAA 1,000 University of South
Alabama Tuition (AMBAC),
5.00%, 11/15/15 903,720
------------
$ 9,246,182
------------
INSURED ELECTRIC UTILITIES - 8.8%
Aaa AAA $1,500 Athens, Alabama Electric
(MBIA), 6.00%, 6/1/25 $ 1,506,900
Aaa AAA 3,000 Columbia, Alabama IDB
(AL Power) (AMBAC),
6.50%, 9/1/23 3,109,470
Aaa AAA 2,500 Dekalb & Cherokee,
Alabama Gas District
(AMBAC), 5.50%, 3/1/21 2,380,600
Aaa AAA 250 Puerto Rico Electric
Power Authority
(STRIPES) (FSA),
Variable, 7/1/03 (1) 268,683
Aaa AAA 2,000 Wilsonville, Alabama PCR
(MBIA), 6.75%, 2/1/15 2,120,720
------------
$ 9,386,373
------------
INSURED GENERAL
OBLIGATIONS - 8.2%
Aaa AAA $ 500 Fairfield City, Alabama
(AMBAC), 6.30%, 6/1/22 $ 518,505
Aaa AAA 2,065 Hoover, Alabama Warrants
(AMBAC), 5.00%, 3/1/20 1,825,584
Aaa AAA 1,000 Huntsville, Alabama
Public Building
Authority (MBIA), 6.00%,
10/1/25 1,004,760
Aaa AAA 3,250 Madison, Alabama School
Warrants (MBIA), 6.00%,
2/1/24 3,301,090
Aaa AAA 1,535 North Port, Alabama
(AMBAC), 5.70%, 3/1/21 1,483,915
Aaa AAA 500 Troy City, Alabama
(CAPG), 6.60%, 6/1/12 534,835
------------
$ 8,668,689
------------
INSURED HEALTH CARE - 2.0%
Aaa AAA $2,000 Huntsville, Alabama
Health Care Facilities
(MBIA), 6.50%, 6/1/13 $ 2,110,440
------------
INSURED HOSPITAL - 1.3%
Aaa AAA $1,500 University of Alabama
Hospital Revenue-
Birmingham (MBIA),
5.00%, 10/1/14 $ 1,360,410
------------
INSURED MISCELLANEOUS - 0.5%
Aaa AAA $1,950 Jefferson, Alabama
Birmingham-Jefferson
Civic Center (MBIA), 0%,
9/1/18 $ 514,722
------------
INSURED PORT AUTHORITY - 4.3%
Aaa AAA $4,500 Alabama State Docks
Department (MBIA) (AMT),
6.30%, 10/1/21 $ 4,552,830
------------
INSURED SOLID WASTE - 4.4%
Aaa AAA $4,000 Huntsville, Alabama
Solid Waste Disposal
(FGIC) (AMT), 7.00%,
10/1/14 $ 4,257,520
Aaa AAA 350 Huntsville, Alabama
Solid Waste Disposal
(FGIC) (AMT), 7.00%,
10/1/08 375,841
------------
$ 4,633,361
------------
INSURED WATER & SEWER - 21.0%
Aaa AAA $2,500 Alabama Water Pollution
Control Authority
(AMBAC), 5.00%, 8/15/15 $ 2,247,925
Aaa AAA 2,000 Bessemer, Alabama Water
(AMBAC), 5.75%, 7/1/26 1,944,260
Aaa AAA 2,000 Chilton, Alabama Water
(AMBAC), 5.50%, 4/1/21 1,894,300
Aaa AAA 1,000 Fort Payne, Alabama
Water (MBIA), 5.35%,
7/1/16 937,240
Aaa AAA 1,000 Fort Payne, Alabama
Water (MBIA), 5.25%,
7/1/26 897,620
Aaa AAA 1,100 Gulf Shores, Alabama
Water and Sewer (AMBAC),
6.50%, 2/1/15 1,155,066
Aaa AAA 500 Northeast, Alabama
Water, Sewer and Fire
Protection (AMBAC),
5.70%, 5/1/23 485,950
Aaa AAA 3,075 Prichard, Alabama Water
and Sewer (AMBAC),
6.125%, 11/15/14 3,162,699
Aaa AAA 1,400 Satsuma Alabama
Waterworks and Sewer
(MBIA), 6.00%, 7/1/25 1,406,482
Aaa AAA 6,000 Scottsboro, Alabama
Water, Sewer and Gas
(AMBAC), 6.50%, 12/1/14 6,372,660
</TABLE>
44
<PAGE> 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED WATER & SEWER - (CONTINUED)
Aaa AAA 750 West Morgan-East
Lawrence, Alabama Water
Authority (FGIC), 6.00%,
5/1/22 757,493
Aaa AAA 1,000 West Morgan-East
Lawrence, Alabama Water
Authority (FSA), 6.85%,
8/15/25 1,078,460
------------
$ 22,340,155
------------
LEASE - 0.4%
NR BBB $ 500 PR ITEM Guaynabo Lease,
5.625%, 7/1/22 $ 451,885
------------
MISCELLANEOUS - 0.1%
A A $ 100 Tennessee Valley,
Alabama Exhibit
Commission, 6.70%,
6/1/10 $ 106,933
------------
NURSING HOMES - 0.9%
NR NR $ 325 Fairhope Alabama Midtown
Medical Clinic Board
(Beverly Enterprises),
6.375%, 6/1/09 $ 308,802
NR NR 670 Mobile Alabama Midtown
Medical Clinic Board
(Beverly Enterprises),
7.00%, 4/1/07 666,496
------------
$ 975,298
------------
TRANSPORTATION - 1.9%
NR BBB $2,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 2,020,140
------------
WATER & SEWER - 1.3%
NR NR $1,500 Moulton City, Alabama
Water, 6.30%, 1/1/18 $ 1,424,250
------------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$103,574,803) $106,272,892
============
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Alabama
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specified industry or
municipality. In order to reduce the risk associated with such economic
developments, at August 31, 1996, 55.3% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.5% to 26.4% of total investments.
See notes to financial statements
45
<PAGE> 46
- --------------------------------------------------------------------------------
Arkansas Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 4.9%
A1 NR $1,750 University of Arkansas
Board of Trustees, 7.20%,
12/1/10 (2) $ 1,943,515
A NR 610 Arkansas State Student
Loan Authority (AMT),
7.25%, 6/1/09 666,889
A NR 1,000 Arkansas State Student
Loan Authority (AMT),
6.25%, 6/1/10 994,420
------------
$ 3,604,824
------------
ELECTRIC UTILITIES - 9.6%
A NR $1,750 Conway, Arkansas
Electric, 5.70%, 8/1/09 $ 1,741,985
NR BBB 1,250 Guam Power Authority,
5.25%, 10/1/13 1,119,875
NR BBB 1,250 Guam Power Authority,
5.25%, 10/1/23 1,073,250
Baa2 BBB 1,250 Independence, Arkansas
PCR (AR P & L), 6.25%,
1/1/21 1,231,425
Baa2 BBB- 750 Jefferson, Arkansas PCR
(AR P & L), 6.125%,
10/1/07 750,135
Baa2 BBB 550 Jefferson, Arkansas PCR
(AR P & L), 6.30%, 6/1/18 555,511
Baa2 BBB 500 Pope, Arkansas PCR (AR P
& L), 6.30%, 12/1/16 498,240
Baa1 BBB+ 500 Puerto Rico Electric
Power Authority, 0%,
7/1/17 138,810
------------
$ 7,109,231
------------
ESCROWED - 3.6%
Aaa AAA $ 500 Arkansas DFA Wastewater
System (MBIA), 7.00%,
6/1/14 $ 551,860
Aaa AAA 650 Arkansas State Waste
Disposal and Pollution
Abatement U.T.G.O.,
6.25%, 7/1/22 696,644
Aaa AAA 500 Harrison, Arkansas Single
Family Mortgage (FGIC),
7.40%, 9/1/11 571,240
Aaa AAA 750 Puerto Rico Public
Buildings Authority
6.875%, 7/1/21 839,948
------------
$ 2,659,692
------------
GENERAL OBLIGATIONS - 4.5%
Aa AA $ 750 Arkansas State College
Savings, 0%, 6/1/13 $ 279,255
Aa AA 2,750 Arkansas State College
Savings, 0%, 6/1/14 965,250
Aa AA 1,000 Arkansas State College
Savings, 0%, 6/1/14 351,000
Baa1 A 1,000 Puerto Rico, 5.25%,
7/1/18 914,990
NR NR 750 Virgin Island, 7.25%,
10/1/18 790,133
------------
$ 3,300,628
------------
HOSPITALS - 15.2%
Aa AA $2,750 Arkansas DFA (Sisters of
Mercy), 5.00%, 6/1/19 $ 2,438,920
Baa NR 700 Baxter, Arkansas Hospital
Improvement, 7.25%,
9/1/07 738,094
Baa NR 750 Baxter, Arkansas Hospital
Improvement, 7.50%,
9/1/21 795,195
NR A+ 1,125 Little Rock, Arkansas
(Baptist Medical Center),
6.80%, 11/1/05 1,240,898
NR A+ 1,750 Little Rock, Arkansas
(Baptist Medical Center),
5.50%, 9/1/15 1,659,193
NR A 1,000 Little Rock, Arkansas
(Baptist Medical Center-
Parkway Village), 7.00%,
10/1/17 1,057,190
NR A- 2,250 Pulaski, Arkansas
(Children's Hospital),
6.20%, 3/1/22 2,247,098
A1 AA 1,000 Sebastian, Arkansas
(Sparks Regional Medical
Center), 5.60%, 4/1/06 1,019,710
------------
$11,196,298
------------
HOUSING - 11.2%
NR AAA $1,830 Arkansas DFA Single
Family Mortgage (GNMA)
(AMT), 5.80%, 6/1/25 $ 1,789,758
NR AAA 725 Arkansas DFA Single
Family Mortgage (GNMA)
(AMT), 7.85%, 12/1/21 761,373
NR AAA 3,550 Arkansas DFA Single
Family Mortgage
(GNMA/FNMA) (AMT), 6.70%,
7/1/27 3,609,640
NR AAA 1,000 Arkansas DFA Single
Family Mortgage (GNMA)
(AMT), 7.45%, 1/1/27 1,074,270
A NR 3,000 Arkansas DFA Compound
Accretion, 0%, 12/1/11 1,028,430
------------
$ 8,263,471
------------
</TABLE>
46
<PAGE> 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION CONTROL
REVENUE - 15.4%
Baa2 BBB $2,350 Baxter, Arkansas IDR
(Aeroquip Corporation),
5.80%, 10/1/13 $ 2,266,082
A1 AA- 2,500 Blytheville, Arkansas
(Nucor Corporation)
(AMT), 6.90%, 12/1/21 2,622,400
A1 AA- 300 Blytheville, Arkansas
(Nucor Corporation)
(AMT), 6.375%, 1/1/23 304,116
A3 A- 745 Gurdon, Arkansas
(International Paper),
5.75%, 2/1/08 745,410
A1 AA- 1,000 Jonesboro, Arkansas
(Anheuser-Busch), 6.50%,
11/15/12 1,072,630
NR A- 975 Pine Bluff, Arkansas
(International Paper)
(AMT), 5.55%, 10/1/17 914,014
A2 NR 750 Puerto Rico IM&E
(American Home Products),
5.10%, 12/1/18 671,018
Baa3 BB+ 2,740 Puerto Rico Ports
Authority (American
Airlines) (AMT), 6.30%,
6/1/23 2,739,644
------------
$11,335,314
------------
INSURED EDUCATION - 0.7%
Aaa AAA $ 500 University of Central
Arkansas (AMBAC), 6.125%,
4/1/26 $ 504,300
------------
INSURED ELECTRIC UTILITIES - 7.5%
Aaa AAA $ 250 North Little Rock,
Arkansas Electric System
(MBIA), 6.50%, 7/1/10 $ 275,233
Aaa AAA 3,390 North Little Rock,
Arkansas Electric System
(MBIA), 6.50%, 7/1/15 3,696,117
Aaa AAA 450 Puerto Rico Electric
Power Authority (STRIPES)
(FSA), Variable, 7/1/03
(1) 483,629
Aaa AAA 1,000 West Memphis, Arkansas
Public Utilities (MBIA),
6.60%, 1/1/09 1,064,560
------------
$ 5,519,539
------------
INSURED GENERAL OBLIGATIONS - 5.9%
Aaa AAA $1,610 Jonesboro, Arkansas
School District (AMBAC),
6.125%, 2/1/15 $ 1,627,324
Aaa AAA 1,090 Lincoln, Arkansas School
District #48 (MBIA),
5.00%, 2/1/18 992,510
Aaa AAA 500 Springdale, Arkansas
School District (AMBAC),
5.125%, 6/1/16 463,355
Aaa AAA 680 White Hall, Arkansas
School District (AMBAC),
4.75%, 4/1/12 615,828
Aaa AAA 710 White Hall, Arkansas
School District (AMBAC),
4.75%, 4/1/13 639,667
------------
$ 4,338,684
------------
INSURED HEALTH CARE - 1.2%
Aaa AAA $ 400 Saline, Arkansas
Healthcare (Evan Lutheran
Good Samaritan) (AMBAC),
5.80%, 6/1/11 $ 395,667
Aaa AAA 500 Saline, Arkansas
Healthcare (Evan Lutheran
Good Samaritan) (AMBAC),
6.00%, 6/1/18 517,109
------------
$ 912,776
------------
INSURED TRANSPORTATION - 0.7%
Aaa AAA $ 500 Little Rock, Arkansas
Airport (MBIA), 6.00%,
11/1/14 $ 510,769
------------
INSURED WATER & SEWER - 7.4%
Aaa AAA $1,250 Arkansas DFA Wastewater
System (MBIA), 5.40%,
12/1/15 $ 1,209,237
Aaa AAA 1,680 Arkansas DFA Wastewater
System (MBIA), 5.00%,
12/1/08 1,591,413
Aaa AAA 2,000 Arkansas DFA Wastewater
System (MBIA), 5.00%,
6/1/15 1,833,419
Aaa AAA 300 Beaver, Arkansas Water
District (MBIA), 5.85%,
11/15/08 307,616
Aaa AAA 500 Jonesboro, Arkansas Water
and Light (AMBAC), 5.25%,
12/1/13 477,570
------------
$ 5,419,255
------------
</TABLE>
47
<PAGE> 48
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
LEASE/CERTIFICATE OF
PARTICIPATION - 0.3%
NR BBB $ 250 Puerto Rico IM&E Guaynabo
Lease, 5.625%, 7/1/22 $ 225,943
------------
SPECIAL TAX REVENUE - 3.1%
A NR $2,000 Little Rock, Arkansas
Hotel & Restaurant Tax,
7.375%, 8/1/15 $ 2,315,720
------------
WATER & SEWER REVENUE - 8.8%
NR NR $ 500 Conway, Arkansas Water,
5.40%, 5/1/11 $ 485,670
NR NR 1,250 Cross, Arkansas Rural
Water, 5.75%, 4/1/18 1,215,338
A1 NR 3,390 Little Rock, Arkansas
Sewer, 5.50%, 8/1/14 3,270,130
NR NR 1,500 South Sebastian, Arkansas
Water, 6.15%, 6/1/23 1,518,765
------------
$ 6,489,903
------------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$72,738,104) $73,706,347
============
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Arkansas
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 August 31, 1996, 24.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.7% to 16.3% of total investments.
See notes to financial statements
48
<PAGE> 49
- --------------------------------------------------------------------------------
Georgia Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSISTED LIVING - 1.4%
NR NR $1,500 De Kalb County Private
Hospital Authority,
Atlanta Inc., 8.50%,
3/1/25 $ 1,514,175
-----------
EDUCATION - 3.0%
Aa1 AA $1,000 De Kalb County, Emory
University 1994A, 6.00%,
10/1/14 $ 1,010,480
Aa1 AA 1,000 De Kalb County, Emory
University 1995A, 5.375%
11/1/25 928,570
Aa1 AA 310 Private Colleges and
Universities Authority,
Emory University, 6.40%,
10/1/23 322,447
Aa AA- 1,000 Private Colleges and
Universities Authority,
Agnes Scott College,
5.625%, 6/1/23 965,730
-----------
$ 3,227,227
-----------
GENERAL OBLIGATIONS - 13.3%
Aa AA- $ 300 City of Alpharetta,
6.50%, 5/1/10 (2) $ 328,818
Aa AA 3,350 City of Atlanta, 6.10%,
12/1/19 3,418,608
Aa AA 2,000 City of Atlanta, 6.125%,
12/1/23 2,037,060
Aa1 AA+ 1,480 Gwinnett County, Water &
Sewer, 6.50%, 8/1/06 (4) 1,492,284
A A 450 Paulding County School
District, 6.625%, 2/1/08 500,927
Aaa AA+ 500 State of Georgia, 6.30%,
3/1/08 (2) 544,405
Baa1 A 1,000 Commonwealth of Puerto
Rico, 5.40%, 7/1/25 918,100
Baa1 A 1,000 Commonwealth of Puerto
Rico, Aqueduct & Sewer
Authority, 6.25%, 7/1/12 1,064,270
Baa1 A 1,875 Commonwealth of Puerto
Rico, Aqueduct & Sewer
Authority, 5.00%, 7/1/19 1,658,269
Baa1 A 1,000 Commonwealth of Puerto
Rico, Public Building
Authority, 5.75%, 7/1/15 967,550
NR NR 1,400 Virgin Islands, 7.25%,
10/1/18 1,474,913
-----------
$ 14,405,204
-----------
HOSPITALS - 11.8%
Baa1 NR $3,500 Fulco County, Georgia
Baptist Health, 6.375%,
9/1/22 (4) $ 3,394,265
A NR 5,040 City of Savannah, St.
Joseph's Hospital
Project, 6.20%, 7/1/23 4,898,426
NR BBB 1,785 Toombs County, Dr. John
M. Meadows Memorial,
7.00%, 12/1/17 1,804,724
NR BBB+ 2,750 Tri City Hospital
Authority, 6.375%,
7/1/16 2,658,233
-----------
$ 12,755,648
-----------
HOUSING - 10.8%
Aa NR $1,450 Georgia Housing Finance
Authority, (AMT),
6.875%, 12/1/20 $ 1,513,771
Aa AA 2,395 Georgia Housing Finance
Authority, SFMR, (FHA),
(AMT), 6.70%, 12/1/25 2,435,020
Aa AA+ 1,500 Georgia Housing Finance
Authority, SFMR, (FHA),
(AMT), 7.05%, 12/1/20 1,569,900
Aa AA+ 1,555 Georgia Housing Finance
Authority, SFMR, (FHA),
(AMT), 7.125%, 12/1/26 1,630,169
Aa AA+ 3,985 Georgia Housing Finance
Authority, SFMR, (AMT),
6.55%, 12/1/27 4,091,320
Aa AA+ 395 Georgia Residential
Finance Authority, Home
Ownership, (FHA), 7.50%,
6/1/17 417,231
-----------
$ 11,657,411
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 8.5%
A1 AA- $1,000 Cartersville Development
Authority,
Anheuser-Busch, (AMT),
7.375%, 5/1/09 $ 1,156,330
A2 NR 1,245 Commonwealth of Puerto
Rico, American Home
Products, 5.10%, 12/1/18 1,113,889
Baa3 BB+ 2,250 Commonwealth of Puerto
Rico, Port Authority
American Airlines,
6.25%, 6/1/26 2,234,678
NR AA- 500 Savannah Economic
Development Authority,
Hershey Foods, 6.60%,
6/1/12 529,385
</TABLE>
49
<PAGE> 50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT
REVENUE - (CONTINUED)
NR NR 1,250 Savannah Economic
Development Authority,
Intercat Inc., (AMT),
9.00%, 1/1/15 1,315,988
A1 A- 750 Savannah Economic
Development Authority,
Union Camp Corp., 6.80%,
2/1/12 802,552
NR AA- 2,000 Vienna Water & Sewer,
Cargill Project, (AMT),
6.00%, 9/1/14 2,013,780
-----------
$ 9,166,602
-----------
INSURED GENERAL
OBLIGATIONS - 0.5%
Aaa AAA $ 500 Commonwealth of Puerto
Rico, (AMBAC),
7/1/15 (1) $ 495,820
-----------
INSURED HOSPITAL - 15.7%
Aaa AAA $ 675 Chatham County, Memorial
Medical Center, (MBIA),
7.00%, 1/1/21 $ 721,123
Aaa AAA 305 Chatham County, Memorial
Medical Center, (MBIA),
6.85%, 1/1/21 325,075
Aaa AAA 1,300 Cobb County, Kennestone
Hospital, (MBIA), 5.00%,
4/1/24 1,128,855
Aaa AAA 2,500 Fulco County, Northside,
(MBIA), 5.125%, 10/1/16 2,281,925
Aaa AAA 2,225 Gainsville and Hall
County, NE Healthcare,
(MBIA), 6.00%, 10/1/25 2,230,229
Aaa AAA 1,500 Gwinnett County,
Gwinnett Hospital,
(AMBAC), 5.00%, 9/1/13
(4) 1,348,935
Aaa AAA 2,500 Macon-Bibb County,
Medical Center of
Central Georgia, (FGIC),
5.00%, 8/1/14 2,258,250
Aaa AAA 2,000 Medical Center, Columbus
Regional Healthcare,
(MBIA), 6.40%, 8/1/06 2,141,660
Aaa AAA 1,500 Medical Center Hospital
Authority Floats,
(MBIA), 8/1/10 (1) 1,623,945
Aaa AAA 1,500 Smyrna Hospital
Authority - Emory
Adventist Hosp (AMBAC),
5.5%, 8/1/26 (3) 1,426,170
Aaa AAA 1,375 Walker, Dade and Catoosa
Counties Hospital,
(FGIC), 7.00%, 10/1/10 1,513,641
-----------
$ 16,999,808
-----------
INSURED LEASE/COP - 2.5%
Aaa AAA $1,000 East Point Building
Authority, (FGIC),
6.00%, 2/1/10 $ 1,033,300
Aaa AAA 1,750 Glynn-Brunswick Mem
Hosp, S.E. Georgia
Health, (MBIA), 5.25%,
8/1/13 1,634,553
-----------
$ 2,667,853
-----------
INSURED SPECIAL TAX - 3.8%
Aaa AAA $1,000 Metropolitan Atlanta
Rapid Transit Authority,
(AMBAC), 6.25%, 7/1/11 $ 1,074,190
Aaa AAA 1,000 Metropolitan Atlanta
Rapid Transit Authority,
(AMBAC), 6.25%, 7/1/20 1,060,280
Aaa AAA 1,750 Metropolitan Atlanta
Rapid Transit Authority,
(AMBAC), 5.125%, 7/1/19 1,576,890
Aaa AAA 500 Metropolitan Atlanta
Rapid Transit Authority,
(AMBAC), 5.125%, 7/1/18 451,605
-----------
$ 4,162,965
-----------
INSURED UTILITIES - 3.6%
Aaa AAA $1,480 Cordele Public Utility
Authority, (MBIA),
6.50%, 11/1/19 $ 1,558,514
Aaa AAA 750 Municipal Electric
Authority of Georgia,
(MBIA), 0%, 1/1/07 423,248
Aaa AAA 1,000 Municipal Electric
Authority of Georgia,
(FGIC), 5.50%, 1/1/12 982,650
Aaa AAA 900 Commonwealth of Puerto
Rico, Electric Power
Authority, (FSA), 7/1/03
(1) 967,257
-----------
$ 3,931,669
-----------
</TABLE>
50
<PAGE> 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED WATER & SEWER - 4.2%
Aaa AAA $2,700 City of Atlanta, (FGIC),
5.00%, 1/1/15 $ 2,413,125
Aaa AAA 1,975 Cherokee County, (MBIA),
6.875%, 8/1/13 2,132,013
-----------
$ 4,545,138
-----------
LEASE/COP - 1.0%
Aa AA $2,300 Fulton County Building
Authority, Judicial
Center, 0%, 1/1/10 $ 1,075,181
-----------
MISCELLANEOUS - 0.9%
NR NR $1,000 Atlanta Downtown
Development Auth,
Central Atlanta Hosp,
8.00%, 1/1/26 $ 948,160
-----------
SOLID WASTE - 1.0%
A1 A+ $1,000 Savannah Resource
Recovery, Savannah
Energy Systems Co.,
6.30%, 12/1/06 $ 1,044,790
-----------
SPECIAL TAX - 2.4%
Baa1 A $ 750 Commonwealth of Puerto
Rico, Highway and
Transportation
Authority, 5.5%, 7/1/36 $ 695,490
Baa1 A 2,250 Commonwealth of Puerto
Rico, Highway and
Transportation
Authority, 5.0%, 7/1/36 1,916,370
-----------
$ 2,611,860
-----------
UTILITIES - 15.6%
A1 A $2,000 Burke County Pollution
Control, Georgia Power,
6.375%, 8/1/24 $ 2,025,400
A1 A+ 1,000 Monroe County Pollution
Control, Gulf Power
Scherer, 6.30%, 9/1/24 1,014,040
A A 1,500 Georgia Municipal
Electric Power
Authority, 5.70%, 1/1/23 1,416,090
A A 2,000 Georgia Municipal
Electric Power
Authority, 8.25%, 1/1/11 2,454,340
A A 1,000 Georgia Municipal
Electric Power
Authority, 0%, 1/1/12 396,470
A A 3,000 Georgia Municipal
Electric Power
Authority, 5.50%, 1/1/20 2,819,850
A3 A+ 4,000 Monroe County Pollution
Control, Ogelthorpe
Power, 6.55%, 1/1/06 4,314,840
A3 A+ 1,000 Monroe County Pollution
Control, Ogelthorpe
Power, 6.70%, 1/1/09 1,086,630
A3 A+ 1,000 Monroe County Pollution
Control, Oglethorpe
Power, 6.80%, 1/1/12 1,100,500
Baa1 A- 665 Commonwealth of Puerto
Rico, Electrical Power
Authority, 0%, 7/1/17 184,616
Baa1 A- 90 Commonwealth of Puerto
Rico, Electrical Power
Authority, 7.00%, 7/1/07 95,847
-----------
$ 16,908,623
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$105,076,413) $108,118,134
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
(3) When-issued security.
(4) Security has been segregated to cover when-issued securities.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Georgia
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 August 31, 1996, 30.3% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.9% to 14.9% of total investments.
See notes to financial statements
51
<PAGE> 52
- --------------------------------------------------------------------------------
Kentucky Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 4.4%
Aa1 NR $2,460 City of Berea, KY
Educational Development,
Berea College, 5.45%,
3/1/14 $ 2,392,448
A1 AA- 500 University of KY
Consolidated Educational
Buildings, 6.40%, 5/1/09 527,190
A1 AA- 785 University of KY
Consolidated Educational
Buildings, 6.40%, 5/1/11 825,789
A1 AA- 1,000 University of Louisville
Consolidated Educational
Buildings, 5.40%, 5/1/08 988,850
A1 AA- 1,000 University of Louisville
Consolidated Educational
Buildings, 5.40%, 5/1/11 967,480
-----------
$ 5,701,757
-----------
ESCROWED - 4.9%
NR NR $ 190 KY Development Finance
Authority, St. Claire
Medical Center, 7.125%,
9/1/21 $ 210,868
Aaa NR 510 Lexington-Fayette
County, KY Government
Public Facilities,
6.40%, 4/1/12 555,456
Baa1 A 4,155 Commonwealth of Puerto
Rico, Highway and
Transportation
Authority, 6.625%,
7/1/18 4,578,644
Aaa A 1,000 University of Puerto
Rico Revenue, 6.50%,
6/1/13 1,041,170
-----------
$ 6,386,138
-----------
GENERAL OBLIGATIONS - 3.3%
NR A+ $1,030 KY League of Cities
Funding Trust Floating
Indebtedness COP, 6.15%,
8/1/13 $ 1,043,390
NR A 1,415 KY League of Cities
Funding Trust Floating
Indebtedness COP, 5.90%,
8/1/16 1,382,526
A NR 1,400 Meade County, School
District, 5.70%, 7/1/15 1,345,246
NR NR 500 Virgin Islands, 7.25%,
10/1/18 526,755
-----------
$ 4,297,917
-----------
HOSPITALS - 0.8%
Baa1 BBB $ 975 Russell County, KY
Franciscan Sisters of
the Poor Health System,
8.10%, 7/1/15 $ 1,092,663
-----------
HOUSING - 1.8%
NR AAA $1,480 Boone County, Kentucky
Multi-Family, Walnut
Creek Apartments, (FHA),
7.00%, 1/1/27 $ 1,529,328
Aaa AAA 740 KY Housing, Single
Family Mortgage, (FHA),
(AMT), 7.45%, 1/1/23 758,914
-----------
$ 2,288,242
-----------
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION
CONTROL REVENUE - 19.7%
Baa1 NR $2,425 Ashland County, Solid
Waste Disposal, Ashland
Oil, (AMT), 7.125%,
2/1/22 $ 2,543,728
Baa1 BBB 2,355 Ashland County, Solid
Waste Disposal, Ashland
Oil, (AMT), 7.20%,
10/1/20 2,478,402
NR NR 1,000 City of Elsmere,
Courtaulds Package
Corporation, 6.75%,
4/1/10 1,009,700
NR NR 3,075 Fulton County,
H.I.S.-Chic Jeans,
(AMT), 7.50%, 2/1/10 3,059,287
NR NR 1,500 Hancock County, Solid
Waste Disposal,
Southwire Corporation,
(AMT), 7.75%, 7/1/25 1,531,170
NR A- 2,370 Hancock County, Solid
Waste Disposal,
Williamette Corporation,
6.60%, 5/1/26 2,402,422
Baa2 BBB- 3,000 Henderson County, Solid
Waste Disposal,
MacMillan Bloedel,
(AMT), 7.00%, 3/1/25 3,108,120
Aa3 AA 1,000 Jefferson County, E.I.
du Pont de Nemours,
6.30%, 7/1/12 1,067,990
NR BB- 985 Owensboro County, KMART
Corporation, 6.80%,
12/1/07 938,833
NR NR 1,500 Perry County, TJI
International, 6.80%,
5/1/26 1,513,020
NR BB- 915 Powderly, KMART
Corporation, 6.90%,
3/1/07 880,724
</TABLE>
52
<PAGE> 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION CONTROL
REVENUE - (CONTINUED)
A2 NR 1,190 Commonwealth of Puerto
Rico, IM&E, American
Home Products, 5.10%,
12/1/18 1,064,681
Baa3 BB+ 500 Commonwealth of Puerto
Rico, Port Authority,
American Airlines,
(AMT), 6.30%, 6/1/23 499,935
A1 A 2,820 Wickliffe County, Solid
Waste Disposal, Westvaco
Corporation, (AMT),
6.375%, 4/1/26 2,820,958
Ba2 NR 500 Winchester County,
Kentucky, Kroger
Corporation, 6.90%,
7/1/99 517,355
-----------
$ 25,436,325
-----------
INSURED EDUCATION - 0.6%
Aaa AAA $ 700 Northern KY University
Educational Buildings
(AMBAC), 6.25%, 5/1/12 $ 735,805
-----------
INSURED GENERAL
OBLIGATIONS - 0.7%
Aaa AAA $1,000 Jefferson County,
Kentucky School District
U.T.G.O. (MBIA), 4.875%,
1/1/13 $ 899,250
-----------
INSURED HOSPITAL - 11.6%
Aaa AAA $2,500 Daviess County, ODCH
Inc., (MBIA), 6.25%,
8/1/22 $ 2,570,350
Aaa AAA 2,000 Hopkins County, Trover
Clinic Foundation,
(MBIA), 6.625%, 11/15/11 2,145,460
Aaa AAA 2,500 Jefferson County, Jewish
Hospital (AMBAC), 6.50%,
5/1/15 2,620,850
Aaa AAA 1,750 Jefferson County, Jewish
Hospital (AMBAC), 6.55%,
5/1/22 1,839,968
Aaa AAA 4,000 KY Development Finance
Authority St. Luke's
Hospital (MBIA), 7.00%,
10/1/21 4,311,880
Aaa AAA 1,750 KY EDA Baptist
Healthcare (MBIA),
5.00%, 8/15/24 1,505,735
-----------
$ 14,994,243
-----------
INSURED
LEASE/CERTIFICATE OF
PARTICIPATION - 1.1%
Aaa AAA $1,000 City of Danville, Multi-
City Lease, Madisonville
Project, (MBIA), 5.875%,
9/1/10 $ 1,023,110
Aaa AAA 400 Lexington-Fayette County
Government Public
Facilities (FSA), 4.50%,
2/1/10 347,588
-----------
$ 1,370,698
-----------
INSURED TRANSPORTATION - 4.6%
Aaa AAA $1,000 Kenton County,
Cincinnati/Northern
Kentucky Airport, (FSA),
(AMT), 6.30%, 3/1/15 $ 1,021,490
Aaa AAA 1,170 Louisville and Jefferson
County, Kyregl Airport,
(MBIA), 5.30%, 7/1/23 1,064,232
Aaa AAA 1,650 Louisville and Jefferson
County, Kyregl Airport,
(MBIA), (AMT), 5.50%,
7/1/23 1,515,855
Aaa AAA 1,000 Louisville and Jefferson
County, Kyregl Airport,
(MBIA), (AMT), 5.625%,
7/1/25 938,380
Aaa AAA 1,000 KY EDA Turnpike,
Revitalization Project,
(FGIC), 0%, 1/1/10 463,860
Aaa AAA 1,000 KY EDA Turnpike,
Revitalization Project,
(AMBAC), 5.50%, 7/1/11 984,980
-----------
$ 5,988,797
-----------
INSURED UTILITIES - 1.8%
Aaa AAA $1,000 Boone County, Kentucky
Collateralized PCR,
(MBIA), 5.50%, 1/1/24
(2) $ 940,790
Aaa AAA 1,600 Commonwealth of Puerto
Rico, Telephone
Authority, (MBIA),
Variable, 1/16/15 (1) 1,446,400
-----------
$ 2,387,190
-----------
</TABLE>
53
<PAGE> 54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED WATER AND SEWER - 6.7%
Aaa AAA $1,000 Hardin County, Water
System, (MBIA), 5.90%,
1/1/25 $ 999,900
Aaa AAA 800 Kenton County, Water
District, (FGIC),
6.375%, 2/1/17 842,472
Aaa AAA 2,000 Kenton County, Water
District, (FGIC), 6.00%,
2/1/17 2,055,300
Aaa AAA 500 Lexington-Fayette
County, Government
Sewer, (MBIA), 6.375%,
7/1/12 528,530
Aaa AAA 1,000 Louisville and Jefferson
County, Sewer District,
(AMBAC), 6.75%, 5/15/19 1,097,760
Aaa AAA 2,000 Louisville and Jefferson
County, Sewer District,
(AMBAC), 6.75%, 5/15/25 2,188,560
Aaa AAA 1,000 Louisville and Jefferson
County, Sewer District,
(FGIC), 5.20%, 5/15/26 901,080
-----------
$ 8,613,602
-----------
LEASE REVENUE BONDS - 19.7%
A A $1,300 Boone County School
District, 6.75%, 9/1/11 $ 1,391,520
A NR 3,000 Boone County School
District, 5.70%, 5/1/18 2,930,460
A1 A+ 905 Jefferson County School
District, 4.875%, 1/1/11 822,591
A1 A+ 1,250 Jefferson County School
District, 4.875%, 1/1/12 1,114,863
A1 A+ 4,990 Jefferson County Capital
Projects Corporation
Lease, 0%, 8/15/15 1,552,189
A NR 2,500 Jessamine County School
District, 5.375%, 1/1/17 2,309,400
A A+ 3,825 KY State Property and
Buildings, 5.00%, 9/1/13 3,432,248
A A+ 2,500 KY State Property and
Buildings, 6.00%, 9/1/14 2,511,150
A A- 1,000 City of Louisville,
Public Properties
Corporation, 6.80%,
12/1/22 1,063,980
Aa NR 2,000 City of Mount Sterling,
League of Cities Trust
Lease Program, 6.15%,
3/1/13 2,009,140
Aa NR 4,500 City of Mount Sterling,
League of Cities Trust
Lease Program, 6.20%,
3/1/18 4,489,335
A NR 2,000 Owensboro County,
Airport Lease, (AMT),
5.875%, 6/1/15 1,902,820
-----------
$ 25,529,696
-----------
NURSING HOMES - 0.7%
NR NR $ 835 Jefferson County, Health
Facilities, Beverly
Enterprises, 9.75%,
8/1/07 $ 909,766
-----------
TRANSPORTATION - 6.7%
Baa3 BB+ $ 250 Kenton County Airport,
Delta Airlines, (AMT),
7.50%, 2/1/12 $ 265,693
Baa3 BB+ 500 Kenton County Airport,
Delta Airlines, (AMT),
7.50%, 2/1/20 531,385
Baa3 BB+ 3,400 Kenton County Airport,
Delta Airlines, (AMT),
6.125%, 2/1/22 3,230,068
Baa3 BB+ 1,500 Kenton County Airport,
Delta Airlines, (AMT),
7.125%, 2/1/21 1,562,325
NR BBB 3,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 3,030,210
-----------
$ 8,619,681
-----------
UTILITIES - 8.5%
Aa2 AA- $3,450 Carroll County, Kentucky
PCR, KY Utilities
Company, (AMT), 5.75%,
12/1/23 $ 3,281,398
Aa2 AA 2,670 Jefferson County,
Kentucky PCR, Louisville
G&E Company, 5.90%,
4/15/23 2,631,018
Aa2 AA- 1,000 Muhlenburg County,
Kentucky PCR, KY
Utilities Company,
6.25%, 2/1/18 1,031,560
NR BBB 400 Guam Power Authority,
5.25%, 10/1/23 343,440
Baa1 BBB+ 3,500 Commonwealth of Puerto
Rico, Electric Power
Authority, 0%, 7/1/17 971,670
Baa1 BBB+ 2,250 Commonwealth of Puerto
Rico, Electric Power
Authority, 6.375%,
7/1/24 2,303,303
Baa1 BBB+ 500 Commonwealth of Puerto
Rico, Electric Power
Authority, 5.50%, 7/1/25 453,210
-----------
$ 11,015,599
-----------
</TABLE>
54
<PAGE> 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER AND SEWER REVENUE - 2.4%
A A- $1,000 Boone County Sewer
Systems. 5.15%, 12/01/15 $ 906,840
NR A 1,500 Cambell County Water
District, 6.60%, 12/1/11 1,578,240
A NR 650 Harden County Water
District, 6.50%, 9/1/12 682,123
-----------
$ 3,167,203
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$126,102,002) $129,434,572
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Kentucky
municipalities. The ability of the issuers of 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 August 31, 1996, 28.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 1.1% to 15.4% of total investments.
See notes to financial statements
55
<PAGE> 56
- --------------------------------------------------------------------------------
Louisiana Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSISTED LIVING - 9.3%
NR NR $ 500 Louisiana Housing Finance
Agency, HCC Assisted
Living Group, (AMT),
9.00%, 3/1/25 $ 512,240
NR AAA 500 Louisiana Housing Finance
Agency, St Dominic
Assisted Care Facility,
(GNMA), 6.85%, 9/1/25 524,610
NR AAA 2,000 Louisiana Housing Finance
Agency, St Joseph Manor
Retirement Center,
(GNMA), 7.80%, 12/1/35 2,200,660
-----------
$ 3,237,510
-----------
EDUCATION - 0.8%
Aaa NR $ 150 Louisiana Public
Facilities Authority,
Guaranteed Student Loan
Revenue Bonds, (AMT),
6.75%, 9/1/06 $ 157,638
A NR 100 Louisiana Public
Facilities Authority,
Student Loan Revenue
Bonds, (AMT), 7.00%,
9/1/06 104,022
-----------
$ 261,660
-----------
HOSPITALS - 10.2%
Baa1 NR $1,000 Lafourche Parish Hospital
Service District No. 3,
Hospital Revenue Bonds,
6.00%, 10/1/23 $ 914,160
NR BBB 750 Louisiana Public Health
Facilities, General
Health System, 6.80%,
11/1/16 744,218
Aa AA 1,000 Louisiana Public Health
Facilities, Sisters of
Mercy Health System,
5.00%, 6/1/19 867,770
NR A- 750 St. Tammany Parish
Hospital Service District
No. 1, Hospital Revenue
Bonds, 6.50%, 7/1/17 759,060
NR A- 250 St. Tammany Parish
Hospital Service District
No. 1, Hospital Revenue
Bonds, 6.50%, 7/1/22 252,252
-----------
$ 3,537,460
-----------
HOUSING - 29.9%
Aaa NR $ 820 East Baton Rouge Mortgage
Finance Authority SF,
(GNMA/FNMA), 7.00%,
4/1/32 $ 850,594
Aaa NR 235 East Baton Rouge Mortgage
Finance Authority SF,
(AMT), (GNMA/FNMA),
7.10%, 10/1/24 247,467
Aaa AAA 95 East Baton Rouge Mortgage
Finance Authority SF,
(AMT), (GNMA), 7.875%,
12/1/21 100,747
NR AAA 1,850 Parish of Jefferson, Home
Mortgage Authority,
(AMT), (GNMA/FNMA),
7.35%, 12/1/16 2,074,757
NR AAA 620 Louisiana Housing Finance
Authority, MFMB, (FHA),
6.95%, 7/1/16 636,120
Aaa NR 1,220 Louisiana Housing Finance
Authority, SFMB, (AMT),
(GNMA), 8.00%, 3/1/25 1,326,457
Aaa NR 600 Louisiana Housing Finance
Authority, SFMB, (AMT),
(GNMA), 6.30%, 12/1/27 602,394
Aaa NR 465 Louisiana Housing Finance
Authority, SFMB, (AMT),
(GNMA/FNMA), 6.55%,
12/1/26 470,654
NR AAA 150 Louisiana Housing Finance
Authority, Multifamily
Housing - Westview
Apartment II, (AMT),
(FHA), 7.95%, 1/1/32 158,382
NR A 1,000 Louisiana Public
Facilities Authority,
Multifamily
Housing - Windsor
Housing, 6.25%, 1/1/26
(2) 969,860
Aaa NR 1,900 New Orleans Home Mortgage
Authority, (AMT),
(GNMA/FNMA), 6.30%,
6/1/28 1,904,161
</TABLE>
56
<PAGE> 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - (CONTINUED)
A NR 350 Shreveport Housing
Finance Authority,
MFMB - U.S., Goodman
Plaza-Section 8 Assisted,
6.10%, 8/1/19 337,036
NR AAA 750 Shreveport Home Mortgage
Authority, (AMT),
(GNMA/FNMA), 6.00%,
8/1/28 720,157
-----------
$10,398,786
-----------
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION
CONTROL - 11.6%
A3 A- $1,750 City of Bastrop,
International Paper
Company, (AMT), 6.60%,
3/1/19 $ 1,781,763
A3 A- 750 De Soto Parish,
International Paper
Company, (AMT), 7.70%,
11/1/18 839,423
A3 A- 250 De Soto Parish,
International Paper
Company, (AMT), 6.55%,
4/1/19 254,013
Baa3 BB+ 1,000 Puerto Rico Port
Authority, American
Airlines, (AMT), 6.25%,
6/1/26 993,190
Baa1 BBB+ 150 South Louisiana Port
Commission, GATX
Terminals Corporation,
7.00%, 3/1/23 155,721
-----------
$ 4,024,110
-----------
INSURED EDUCATION - 6.2%
Aaa AAA $ 500 Louisiana Public
Facilities Authority,
Tulane University,
(AMBAC), 6.05%, 10/1/25 $ 500,395
Aaa AAA 625 Louisiana State
University, (MBIA),
5.50%, 7/1/26 578,538
Aaa AAA 1,100 Louisiana State
University and
Agricultural and
Mechanical College,
(FGIC), 5.75%, 7/1/14 1,077,098
-----------
$ 2,156,031
-----------
INSURED GENERAL
OBLIGATIONS - 4.8%
Aaa AAA $ 500 East Baton Rouge Parish,
Public Improvement Sales
Tax Bonds, (FGIC), 5.90%,
2/1/17 $ 495,865
Aaa AAA 3,000 New Orleans, (AMBAC),
0%, 9/1/15 944,460
Aaa AAA 250 Commonwealth of Puerto
Rico, Public Improvement
Bonds, (AMBAC), Variable,
7/1/15 (1) 247,910
-----------
$ 1,688,235
-----------
INSURED HOSPITALS - 4.4%
Aaa AAA $ 100 Louisiana Public
Facilities Authority, Our
Lady of the
Lake Regional Medical
Center, (MBIA), Variable,
12/1/14 (1) $ 102,840
Aaa AAA 1,500 Ouachita Parish, Glenwood
Medical Center, (FSA),
5.75%, 5/15/21 1,436,970
-----------
$ 1,539,810
-----------
INSURED SPECIAL
TAX - 8.3%
Aaa AAA $2,000 Orleans Levee District,
(FSA), 5.95%, 11/1/14 $ 1,991,020
Aaa AAA 1,000 Jefferson Parish School
Board, (AMBAC), 5.00%,
2/1/15 897,640
-----------
$ 2,888,660
-----------
INSURED UTILITY - 0.5%
Aaa AAA $ 150 City of Alexandria,
Utility Revenue Bonds,
(FGIC),
6.00%, 5/1/06 $ 157,217
-----------
LIFE CARE - 4.0%
NR BBB $1,150 Louisiana Public
Facilities Authority,
Glen Retirement System,
6.70%, 12/1/25 $ 1,076,090
NR NR 300 St. Tammany Public
Facilities Authority,
Christwood Project,
9.00%, 11/15/25 316,149
-----------
$ 1,392,239
-----------
SPECIAL TAX - 6.2%
Baa1 A $1,500 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/22 $ 1,305,960
Baa1 A 1,000 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 851,720
-----------
$ 2,157,680
-----------
TRANSPORTATION - 1.5%
A A- $ 500 Mississippi River Bridge
Authority, Bridge Revenue
Bonds, Series 1992,
6.75%, 11/1/12 (2) $ 535,010
-----------
</TABLE>
57
<PAGE> 58
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES - 2.3%
Aa3 NR $ 150 De Soto Parish,
Southwestern Electric
Power Company,
7.60%, 1/1/19 $ 169,947
Ba1 BB+ 150 Pointe Coupe Parish, Gulf
States Utilities Co.,
6.70%, 3/1/13 150,549
Baa2 BBB 500 St Charles Parish,
Louisiana Power and
Light, (AMT),
6.20%, 5/1/23 483,514
-----------
$ 804,010
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$34,274,641) $34,778,418
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio primarily invests in debt securities issued by Louisiana
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 August 31, 1996, 24.2% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 2.0% to 9.9% of total investments.
See notes to financial statements
58
<PAGE> 59
- --------------------------------------------------------------------------------
Maryland Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
COGENERATION - 1.2%
NR NR $1,250 Maryland Energy
Cogeneration (AES
Warrior Run Project)
(AMT), 7.40%, 9/1/19 $1,299,525
---------
EDUCATION - 1.0%
Aa AA+ $1,000 University of Maryland
Auxiliary Facilities &
Tuition, 6.30%, 2/1/10 $1,057,510
---------
ELECTRIC
UTILITIES - 7.6%
A2 A $3,000 Calvert, Maryland PCR
(Baltimore Gas &
Electric Company),
5.55%, 7/15/14 $2,891,190
NR BBB 2,500 Guam Power Authority,
5.25%, 10/1/13 2,239,750
NR BBB 750 Guam Power Authority,
6.625%, 10/1/14 770,737
A1 A 2,225 Prince Georges, Maryland
PCR (Potomac Electric),
6.375%, 1/15/23 2,322,077
---------
$8,223,754
---------
ESCROWED - 5.8%
Aaa NR $1,125 Baltimore, Maryland
Single Family Mortgage
(Inner Harbor), 8.00%,
12/1/10 $1,349,692
Aaa AAA 500 Maryland Health & Higher
Educational (University
of Maryland) (FGIC),
6.50%, 7/1/21 537,940
NR AAA 1,000 Commonwealth of Puerto
Rico Public Improvement,
6.80%, 7/1/21 1,116,150
Aaa AAA 1,500 Puerto Rico Public
Buildings Authority,
6.875%, 7/1/21 1,679,895
NR AAA 1,000 University of Maryland
System Auxiliary
Facility and Tuition,
6.50%, 4/1/11 1,078,200
NR AAA 175 University of Maryland
System Auxiliary
Facility and Tuition,
6.50%, 4/1/12 192,931
Aa NR 310 Worcester, Maryland
Sanitary District,
6.55%, 8/15/17 341,245
---------
$6,296,053
---------
GENERAL OBLIGATIONS - 4.4%
Aa AA- $1,000 Hartford, Maryland,
4.90%, 12/1/10 $ 929,990
A1 AA- 230 Prince Georges,
Maryland, 5.00%, 1/15/11
(2) 214,981
Baa1 A 2,000 Puerto Rico, 6.50%,
7/1/23 2,111,160
NR NR 750 Virgin Islands Public
Finance Authority, 7.25%
10/1/18 790,133
Aa1 AA 500 Washington, Maryland
Suburban Sanitary
District, 6.20%, 6/1/11 524,330
Aa NR 190 Worcester, Maryland
Sanitary District,
6.55%, 8/15/17 200,070
---------
$4,770,664
---------
HOSPITALS - 20.9%
NR NR $ 485 Berlin, Maryland
(Atlantic General
Hospital), 8.375%,
6/1/22 $ 510,351
A1 A 3,500 Maryland Health & Higher
Educational (Good
Samaritan Hospital),
5.75%, 7/1/19 3,404,345
A A 1,500 Maryland Health & Higher
Educational (Memorial
Hospital of Cumberland),
6.50%, 7/1/17 1,540,455
A1 A 3,550 Maryland Health & Higher
Educational (Suburban
Hospital), 5.125%,
7/1/21 3,151,299
Baa1 NR 2,500 Maryland Health & Higher
Educational (Union
Hospital of Cecil),
6.70%, 7/1/22 2,548,350
A A 700 Maryland Health & Higher
Educational (Penninsula
Regional Medical
Center), 5.00%, 7/1/23 596,449
Baa1 BBB 1,250 Maryland Health & Higher
Educational (Howard
County General
Hospital), 5.50%, 7/1/25 1,079,313
Baa NR 1,355 Prince Georges, Maryland
(Greater Southeast
Healthcare System),
6.375%, 1/1/13 1,275,705
Baa NR 4,500 Prince Georges, Maryland
(Greater Southeast
Healthcare System),
6.375%, 1/1/23 4,123,080
A NR 5,000 Prince Georges, Maryland
(Dimensions Health),
5.30%, 7/1/24 4,424,500
---------
$22,653,847
---------
</TABLE>
59
<PAGE> 60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - 7.6%
Aa NR $3,000 Maryland CDA Single
Family (AMT), 6.75%,
4/1/26 $ 3,091,380
Aa NR 245 Maryland CDA Single
Family 6.85%, 4/1/11 256,564
Aa NR 960 Maryland CDA Single
Family (AMT), 6.80%,
4/1/22 984,969
Aa NR 750 Maryland CDA Single
Family (AMT), 6.80%,
4/1/24 769,508
Aa NR 1,810 Maryland CDA Multi
Family (FHA), 6.70%,
5/15/27 1,858,924
Aa NR 1,000 Maryland CDA Multi
Family (FHA) (AMT),
6.70%, 5/15/36 1,024,400
NR AAA 300 Prince Georges, Maryland
(Antoinette Gardens
Apartments) (FHA),
7.00%, 3/1/28 314,019
----------
$ 8,299,764
----------
INDUSTRIAL DEVELOPMENT/
POLLUTION CONTROL
REVENUE - 13.7%
A1 A $1,350 Allegany, Maryland
(Westvaco Corporation
Project), 6.20%, 1/1/08 $ 1,429,245
A2 A 400 Anne Arundel, Maryland
(Bethlehem Steel),
6.00%, 4/1/24 400,552
NR NR 1,350 Baltimore, Maryland
(Bethlehem Steel
Corporation Project),
7.50%, 6/1/15 1,399,761
Aa3 AA- 2,000 Baltimore, Maryland
(Consolidated Coal Sales
Company-E.I. Dupont),
6.50%, 12/1/10 2,139,940
Aa3 AA 2,000 Baltimore, Maryland
(Consolidated Coal Sales
Company-E.I. Dupont),
6.50%, 10/1/11 2,140,760
NR AA- 1,425 Frederick, Maryland EDA
(Cargill, Inc. Project),
6.30%, 11/1/09 (2) 1,517,525
A2 NR 2,600 Puerto Rico IM&E
(American Home), 5.10%,
12/1/18 2,326,194
Baa3 BB+ 1,500 Puerto Rico Port
Authority (American
Airlines) (AMT), 6.30%,
6/1/23 1,499,805
Baa3 BB+ 2,000 Puerto Rico Port
Authority (American
Airlines) (AMT), 6.25%,
6/1/26 1,986,380
----------
$14,840,162
----------
INSURED EDUCATION - 1.1%
Aaa AAA $1,200 Morgan State University,
Maryland Academic and
Facilities (MBIA),
6.10%, 7/1/20 $ 1,262,016
----------
INSURED ELECTRIC
UTILITIES - 3.7%
Aaa AAA $4,000 Montgomery, Maryland
PCR - Potomac Electric
(2nd MBIA), 5.375%,
2/15/24 $ 3,716,040
Aaa AAA 250 Puerto Rico Electric
Power Authority
(STRIPES) (FSA),
Variable, 7/1/03 (1) 268,683
-----------
$ 3,984,723
-----------
INSURED HOSPITALS - 6.1%
Aaa AAA $1,365 Maryland Health & Higher
Educational (Washington
Community Hospital)
(AMBAC), 6.375%, 7/1/22 $ 1,438,191
Aaa AAA 3,500 Maryland Health & Higher
Educational (Anne
Arundel Hospital)
(AMBAC), 5.00%, 7/1/23 3,015,040
Aaa AAA 2,150 Puerto Rico IM&E
Hospital (MBIA), 6.25%,
7/1/24 2,212,350
----------
$ 6,665,581
-----------
INSURED HOUSING - 0.7%
Aaa AAA $ 235 Maryland CDA Housing and
Community Development
(AMBAC), 6.625%, 6/1/12 $ 250,797
Aaa AAA 500 Prince Georges, Maryland
(Keystone Apartments)
(FHA) (MBIA), 6.80%,
7/1/25 515,015
----------
$ 765,812
----------
</TABLE>
60
<PAGE> 61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED MISCELLANEOUS - 3.8%
Aaa AAA $3,370 Maryland Health & Higher
Educational (Johns
Hopkins Parking)
(AMBAC), 5.50%, 7/1/26 $ 3,181,550
Aaa AAA 1,000 Maryland State Stadium
Authority (AMBAC),
5.80%, 3/1/26 964,460
-----------
$ 4,146,010
-----------
INSURED SOLID WASTE - 4.8%
Aaa AAA $5,000 NE Maryland Solid Waste
Disposal (2nd MBIA)
(AMT), 6.30%, 7/1/16 $ 5,180,700
-----------
INSURED TRANSPORTATION - 4.5%
Aaa AAA $2,000 Baltimore, Maryland
International Airport
(AMT) (FGIC), 6.25%,
7/1/14 $ 2,057,420
Aaa AAA 3,000 Washington, D.C. Metro
Area Transportation
(FGIC), 5.25%, 7/1/14 2,824,290
-----------
$ 4,881,710
-----------
INSURED WATER & SEWER - 8.6%
Aaa AAA $ 500 Baltimore, Maryland
Water (FGIC), 5.00%,
7/1/24 $ 443,160
Aaa AAA 2,000 Baltimore, Maryland
Wastewater (MBIA),
5.65%, 7/1/20 1,941,240
Aaa AAA 2,550 Baltimore, Maryland
Wastewater (FGIC),
5.00%, 7/1/22 2,253,588
Aaa AAA 3,000 Baltimore, Maryland
Water (FGIC), 5.50%,
7/1/26 2,852,370
Aaa AAA 2,000 Baltimore, Maryland
Sewer (FGIC), 5.50%,
7/1/26 1,904,300
-----------
$ 9,394,658
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 1.0%
NR BBB $1,250 PR IM&E Guaynabo Lease,
5.625%, 7/1/22 $ 1,129,712
-----------
MISCELLANEOUS - 0.9%
A NR $1,000 Baltimore, Maryland
Revenue Authority,
5.375%, 7/1/18 $ 920,990
-----------
TRANSPORTATION - 1.6%
NR BBB $1,700 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 1,717,119
-----------
WATER & SEWER - 1.0%
Aa AA $1,000 Maryland Water Quality
Financing Administration
Revolving Loan Fund,
6.55%, 9/1/14 $ 1,063,330
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$107,316,217) $108,553,640
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT -- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Maryland
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 August 31, 1996, 37.30% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.3% to 13.7% of total investments.
See notes to financial statements
61
<PAGE> 62
- --------------------------------------------------------------------------------
Missouri Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 3.0%
A NR $2,750 Missouri Higher
Education Loan
Authority, Student Loan,
(AMT), 5.45%, 2/15/09 $ 2,539,158
-----------
ESCROWED - 6.0%
Aaa AAA $ 240 Missouri Health &
Education Authority, St.
Louis Children's, (MBIA)
6.25%, 5/15/12 $ 260,446
Aaa AAA 350 State of Missouri,
Regional Convention &
Sports Complex
Authority, 6.80%,
8/15/11 389,382
Aaa AAA 425 Missouri Health &
Education Authority,
Christian Health, (FGIC)
6.875%, 2/15/21 469,128
NR AAA 1,000 St. Louis County,
Mortgage Revenue,
(GNMA), 5.40%, 1/1/16 953,790
Aaa AAA 250 St. Louis County,
Regional Convention &
Sports Complex
Authority, 7.00%,
8/15/11 281,048
Aaa AAA 600 St. Louis County,
Pattonville School
District, (FGIC) 6.25%,
2/1/10 641,837
Aaa AAA 2,000 City of Sikeston,
Electric System, (MBIA)
6.25%,
6/1/22 (2) 2,182,680
-----------
$ 5,178,311
-----------
GENERAL OBLIGATIONS - 4.0%
Baa1 A $1,750 Commonwealth of Puerto
Rico, 5.40%, 7/1/25 $ 1,606,675
Baa1 A 700 Commonwealth of Puerto
Rico, 5.00%, 7/1/21 614,250
Baa1 A 500 Commonwealth of Puerto
Rico, Aqueduct and
Sewer, 5.00%, 7/1/19 442,205
NR NR 650 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 684,782
-----------
$ 3,347,912
-----------
HEALTHCARE - 0.4%
Baa1 NR $ 300 Cass County, Fox Springs
Living Center, 7.375%,
10/1/22 $ 316,842
-----------
HOSPITALS - 9.5%
Baa NR $2,000 Missouri Health &
Education Authority,
Jefferson Memorial,
6.00%, 8/15/23 $ 1,783,180
Aa AA 3,250 Missouri Health &
Education Authority,
Barnes Jewish Christian,
5.25%, 5/15/14 3,053,570
Baa NR 1,900 Missouri Health &
Education Authority,
Jefferson Memorial,
6.80%, 5/15/25 1,878,473
Aa AA 1,000 Missouri Health &
Education Authority,
Sisters of Mercy, 6.25%,
6/1/15 1,040,260
NR BBB+ 500 Missouri Health &
Education Authority,
Lake of the Ozarks,
6.50%, 2/15/21 493,945
-----------
$ 8,249,428
-----------
HOUSING - 3.0%
NR AAA $ 915 Missouri Housing
Development Authority
SFMR, (AMT), (GNMA)
7.25%, 9/1/26 $ 1,001,367
NR AAA 1,000 Missouri Housing
Development Authority
SFMR, (GNMA), 6.45%,
9/1/27 1,007,450
NR AAA 535 Missouri Housing
Development Authority
SFMR, (AMT), (GNMA)
6.75%, 6/1/24 554,795
-----------
$ 2,563,612
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 11.7%
NR BBB- $1,065 Jefferson County, Kmart
Corporation, 6.40%,
8/1/08 $ 979,992
NR NR 1,300 Kansas City, AFCO CARGO
MCI, (AMT), 8.50%,
1/1/17 1,408,095
A3 NR 1,200 Missouri Environmental
Improvement & Energy
Resources Authority,
American Cyanamid
Company, 5.80%, 9/1/09 1,220,820
A2 NR 1,000 Commonwealth of Puerto
Rico, American Home
Products, 5.10%, 12/1/18 894,690
</TABLE>
62
<PAGE> 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT
REVENUE - (CONTINUED)
Baa3 BB+ 2,000 Commonwealth of Puerto
Rico, Port Authority,
American Airlines (AMT),
6.25%, 6/1/26 1,986,380
A1 AA- 3,750 St Louis IDA, Anheuser-
Busch Project (AMT),
5.875%, 11/1/26 3,603,975
-----------
$ 10,093,952
-----------
INSURED TRANSPORTATION - 0.6%
Aaa AAA $ 500 City of St. Louis, St.
Louis-Lambert
International Airport,
(AMT), (FGIC) 6.125%,
7/1/15 $ 507,225
-----------
INSURED EDUCATION - 2.6%
Aaa AAA $2,500 Missouri Health and
Education, St Louis
University, (AMBAC)
5.20%, 10/1/26 $ 2,238,775
-----------
INSURED GENERAL
OBLIGATIONS - 2.5%
Aaa AAA $1,250 Kansas City School
District, (FGIC) 5.00%,
2/1/14 $ 1,138,688
Aaa AAA 500 Commonwealth of Puerto
Rico, (AMBAC), 7/1/15
(1) 495,820
Aaa AAA 500 Commonwealth of Puerto
Rico, (FSA), 7/1/22 (1) 503,790
-----------
$ 2,138,298
-----------
INSURED
HOSPITALS - 15.4%
Aaa AAA $1,000 Jackson County,
Carondelet Health
System, St. Mary's,
(MBIA) 5.75%, 7/1/24 (4) $ 979,520
Aaa AAA 800 Jackson County, St.
Joseph's Health System,
(MBIA) 6.50%, 7/1/19 839,856
Aaa AAA 1,000 Jackson County, St.
Joseph's Health System,
(MBIA) 6.50%, 7/1/12 1,056,270
Aaa AAA 500 Missouri Health &
Education Authority,
Sisters of St. Mary,
(MBIA) 6.25%, 6/1/07 528,805
Aaa AAA 1,000 Missouri Health &
Education Authority,
Sisters of St. Mary,
(MBIA) 6.25%, 6/1/16 1,031,400
Aaa AAA 1,500 Missouri Health &
Education Authority,
Heartland Health System,
(AMBAC) 6.35%, 11/15/17 1,558,980
Aaa AAA 2,900 Missouri Health &
Education Authority,
Lester Cox Medical
Center, (MBIA) 5.35%,
6/1/10 2,849,946
Aaa AAA 2,000 Missouri Health &
Education Authority, St.
Luke's Health System,
(MBIA) 5.125%, 11/15/19 1,814,660
Aaa AAA 575 Missouri Health &
Education Authority, St.
Louis Children's, (MBIA)
0%, 5/15/08 304,859
Aaa AAA 9,500 Missouri Health &
Education Authority,
Lester Cox Medical
Center, (MBIA) 0%,
9/1/20 2,216,350
-----------
$ 13,180,646
-----------
INSURED HOUSING - 1.9%
Aaa AAA $1,500 City of Springfield, SCA
Realty Multifamily
Mortgage Receipts, (FSA)
7.10%, 1/1/30 $ 1,619,430
-----------
INSURED
LEASE/CERTIFICATE OF
PARTICIPATION - 4.9%
Aaa AAA $1,750 Kansas City Municipal
Assistance Corp., Bartle
Hall Convention,
(AMBAC), 5.00%, 4/15/20 1,562,838
Aaa AAA 1,000 Kansas City Municipal
Assistance Corp., Bartle
Hall Convention,
(AMBAC), 5.60%, 4/15/16 $ 977,820
Aaa AAA 600 Kansas City School
District, Building
Corporation, (FGIC)
6.50%, 2/1/08 645,798
Aaa AAA 500 St. Charles County,
Public Facilities
Authority, (FGIC)
6.375%, 3/15/07 528,235
Aaa AAA 500 St. Louis County
Municipal Finance Corp.,
Civil Courts Building,
(FGIC) 5.75%, 8/1/13 501,090
-----------
$ 4,215,781
-----------
</TABLE>
63
<PAGE> 64
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED UTILITIES - 7.2%
Aaa AAA $5,000 Missouri Environmental
Improvement & Energy
Resources Authority,
Union Electric Project,
(AMT), (AMBAC), 5.45%,
10/1/28 $ 4,538,000
Aaa AAA 700 Commonwealth of Puerto
Rico, Electric Power
Authority, (FSA) 7/1/03
(1) 752,311
Aaa AAA 1,000 City of Sikeston,
Electric System, (MBIA)
5.00%, 6/1/22 888,760
-----------
$ 6,179,071
-----------
INSURED WATER & SEWER - 1.8%
Aaa AAA $1,500 City of St. Louis,
(FGIC) 6.00%, 7/1/14 $ 1,536,735
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 8.3%
A BBB+ $3,000 St. Louis County,
Regional Convention &
Sports Complex
Authority, 5.50%,
8/15/13 $ 2,766,750
A1 A+ 2,000 State of Missouri,
Regional Convention &
Sports Complex
Authority, 5.50%,
8/15/21 1,820,980
A BBB+ 1,000 St. Louis County,
Regional Convention &
Sports Complex
Authority, 5.75%,
8/15/21 917,170
NR NR 1,500 City of St. Louis,
Regional Convention &
Sports Complex
Authority, 7.90%,
8/15/21 1,643,805
-----------
$ 7,148,705
-----------
LIFE CARE - 3.5%
NR NR $ 950 Kansas City, Retirement
Facilities, Kingswood
United Methodist, 9.00%,
11/15/13 (4) $ 1,024,110
NR NR 2,000 Missouri Health &
Education Authority,
Lutheran Hospital,
6.375%, 2/1/27 (3) 1,970,000
-----------
$ 2,994,110
-----------
NURSING HOMES - 3.0%
NR NR $1,000 Kansas City, Encore
Nursing Center, Beverly
Enterprises, 8.00%,
12/1/02 $ 1,040,990
NR NR 500 Missouri Health &
Education Authority,
Bethesda Health Group,
6.625%, 8/15/05 493,850
NR NR 1,000 Missouri Health &
Education Authority,
Bethesda Health Group,
7.50%, 8/15/12 1,013,190
-----------
$ 2,548,030
-----------
SPECIAL TAX REVENUE - 2.3%
Baa1 A $1,000 Commonwealth of Puerto
Rico, Highway &
Transportation
Authority, 6.625%,
7/1/12 $ 1,057,520
Baa1 A 1,000 Commonwealth of Puerto
Rico, Highway &
Transportation
Authority, 5.50%, 7/1/17 947,720
-----------
$ 2,005,240
-----------
TRANSPORTATION - 1.1%
NR NR $1,000 Lake of the Ozarks
Community Board,
Missouri Bridge System,
6.40%, 12/1/25 (4) $ 948,150
-----------
UTILITIES - 3.0%
NR BBB $1,010 Guam Power Authority,
6.30%, 10/1/22 $ 1,009,929
Baa1 A- 1,500 Commonwealth of Puerto
Rico, Electric Power
Authority, 6.375%,
7/1/24 1,535,535
-----------
$ 2,545,464
-----------
WATER & SEWER - 4.3%
Aa NR $ 800 Missouri Environmental
Improvement & Energy
Resources Authority,
6.875%, 6/1/14 $ 867,141
Aa NR 475 Missouri Environmental
Improvement & Energy
Resources Authority,
6.45%, 7/1/08 514,245
Aa NR 500 Missouri Environmental
Improvement & Energy
Resources Authority,
6.55%, 7/1/14 534,385
</TABLE>
64
<PAGE> 65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER & SEWER - (CONTINUED)
Aa NR 1,250 Missouri Environmental
Improvement & Energy
Resources Authority,
7.20%, 7/1/16 (4) 1,417,800
Aa NR 1,000 Missouri Environmental
Improvement & Energy
Resources Authority, 0%,
1/1/14 351,960
-----------
$ 3,685,531
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$83,659,501) $ 85,780,406
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
(3) When-issued security
(4) Security has been segregated to cover when-issued securities.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Missouri
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 August 31, 1996, 41.0% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 3.4% to 17.4% of total investments.
See notes to financial statements
65
<PAGE> 66
- --------------------------------------------------------------------------------
North Carolina Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 2.2%
Aa1 AA+ $1,000 North Carolina
Educational Facilities
Finance Agency, Duke
University, 6.75%,
10/1/21 $ 1,079,530
NR AAA 1,000 North Carolina
Educational Facilities
Finance Agency, Elon
College, (CLEE), 6.375%,
1/1/07 1,051,440
Aa AA 2,000 University of North
Carolina at Chapel Hill,
5.25%, 2/15/19 1,837,000
-----------
$ 3,967,970
-----------
ESCROWED - 3.5%
Aa AA- $2,450 Pitt County Memorial
Hospital, Prerefunded to
12/1/01, 6.90%, 12/1/21 $ 2,721,386
NR AAA 150 Puerto Rico General
Obligation, Prerefunded
to 7/1/00, 7.30%, 7/1/20 167,003
Aaa AAA 1,500 Puerto Rico Public
Building Authority,
Prerefunded to 7/1/02,
6.875%, 7/1/12 1,679,895
Aaa A- 1,000 Puerto Rico Electric
Power Authority,
Prerefunded to 7/1/01,
7.00%, 7/1/21 1,117,790
Baa1 AAA 635 Puerto Rico Electric
Power Authority,
Prerefunded to 7/1/99,
7.125%, 7/1/14 690,232
-----------
$ 6,376,306
-----------
GENERAL OBLIGATIONS - 6.0%
A A- $ 175 Eden, Water and Sewer
Bonds, (AMT), 6.75%,
6/1/08 $ 186,757
Aaa AAA 3,550 North Carolina, 4.75%,
2/1/12 3,196,917
Baa1 A 5,500 Puerto Rico Aqueduct and
Sewer Authority, 5.00%,
7/1/19 4,864,255
NR NR 2,550 Virgin Islands, 7.25%,
10/1/18 2,686,450
-----------
$ 10,934,379
-----------
HOSPITALS - 19.2%
Aa AA $2,090 Charlotte-Mecklenberg
Hospital, 0%, 1/1/06 $ 1,264,889
Aa AA 10,380 Charlotte-Mecklenberg
Hospital, 5.875%,
1/15/26 10,200,945
Aa AA 1,700 North Carolina Medical
Care Commission,
Carolina Medicorp,
6.00%, 5/1/21 1,701,870
NR A 5,500 North Carolina Medical
Care Commission, Mercy
Hospital, 6.50%, 8/1/08 5,758,720
Aa AA 3,000 North Carolina Medical
Care Commission, North
Carolina Baptist
Hospital, 6.00%, 6/1/22 3,008,850
Aa AA 1,700 North Carolina Medical
Care Commission,
Presbyterian Health
Services, 6.00%, 10/1/24 1,695,325
A1 A+ 5,000 North Carolina Medical
Care Commission, Rex
Hospital, 6.125%, 6/1/10 5,007,750
NR BBB+ 2,500 North Carolina Medical
Care Commission,
Roanoke-Chowan Hospital,
7.75%, 10/1/19 2,616,700
Aa AA- 1,500 Pitt County Memorial
Hospital, 5.25%, 12/1/21 1,369,020
Aa AA- 2,380 University of North
Carolina at Chapel Hill
Hospital, 6.00%, 2/15/24 2,379,881
-----------
$ 35,003,950
-----------
HOUSING - 12.1%
NR AAA $1,900 Charlotte Housing
Authority, Double Oaks,
(FHA), (FNMA), 7.35%,
5/15/26 $ 2,050,328
Aa A+ 1,250 North Carolina HFA,
SFMR, (AMT), 6.20%,
9/1/27 1,249,975
Aa AA 2,000 North Carolina HFA,
MFMR, 6.45%, 9/1/27 2,004,800
Aa A+ 2,105 North Carolina HFA,
SFMR, (AMT), 6.60%,
9/1/26 2,166,971
Aa AA 2,250 North Carolina HFA,
MFMR, 6.70%, 1/1/26 2,343,330
Aa A+ 3,880 North Carolina HFA,
SFMR, (AMT), 6.70%,
9/1/26 4,009,126
Aa AA 4,395 North Carolina HFA,
MFMR, 6.85%, 7/1/13 4,644,636
Aa A+ 855 North Carolina HFA,
SFMR, 6.95%, 3/1/17 899,204
Aa A+ 880 North Carolina HFA,
SFMR, (AMT), 7.05%,
9/1/20 919,978
</TABLE>
66
<PAGE> 67
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - (CONTINUED)
Aa AA 1,500 North Carolina HFA,
SFMR, (AMT), 6.30%,
3/1/26 1,490,040
Aaa AAA 130 Puerto Rico HFC, SFMR,
(GNMA), 6.85%, 10/15/23 135,621
-----------
$ 21,914,009
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 13.6%
Baa1 BBB $3,200 Haywood County IDA,
Champion International
Corporation, (AMT),
5.50%, 10/1/18 (2) $ 2,936,000
Baa1 BBB 1,500 Haywood County IDA,
Champion International
Corporation, (AMT),
5.75%, 12/1/25 1,375,320
Baa1 NR 1,000 Haywood County IDA,
Champion International
Corporation, 6.00%,
3/1/20 970,610
Baa1 NR 1,350 Haywood County IDA,
Champion International
Corporation, (AMT),
6.25%, 9/1/25 1,332,194
A2 A 3,500 Martin County IDA,
Weyerhaeuser Company
Project, (AMT), 6.00%,
11/1/25 3,405,780
A2 A 4,250 Martin County IDA,
Weyerhaeuser Company
Project, (AMT), 6.80%,
5/1/24 4,448,433
Baa2 BBB 2,500 New Hanover County IDA,
Occidental Petroleum
Corporation, 6.70%,
7/1/19 2,610,875
Baa3 BB+ 5,155 Puerto Rico Port
Authority, American
Airlines, (AMT), 6.25%,
6/1/26 5,119,894
Baa3 BB+ 1,500 Raleigh-Durham Airport
Authority, American
Airlines, 9.40%, 11/1/00 1,681,995
NR AA 850 Robeson County IDA,
Campbell Soup Company,
6.40%, 12/1/06 918,876
-----------
$ 24,799,977
-----------
INSURED GENERAL
OBLIGATIONS - 2.5%
Aaa AAA $1,000 Puerto Rico, (AMBAC),
Variable, 7/1/15 (1) $ 991,640
Aaa AAA 3,500 Puerto Rico, (FSA),
Variable, 7/1/22 (1) 3,526,530
-----------
$ 4,518,170
-----------
INSURED HOSPITALS - 8.6%
Aaa AAA $2,000 Catawba County, Catawba
Memorial Hospital,
(AMBAC), 6.20%, 10/1/12 $ 2,052,160
Aaa AAA 500 Cumberland County
Hospital, (MBIA), 0%,
10/1/09 232,620
Aaa AAA 1,100 New Hanover County
Medical Center, 5.75%,
10/1/26 1,060,367
Aaa AAA 3,750 North Carolina Medical
Care Commission, Moore
Regional Hospital,
(FGIC), 5.00%, 10/1/18 3,311,025
Aaa AAA 1,750 North Carolina Medical
Care Commission, Moore
Regional Hospital,
(FGIC), 5.20%, 10/1/13 1,635,288
Aaa AAA 2,500 North Carolina Medical
Care Commission, Wesley-
Long Community Hospital,
(AMBAC), 5.25%, 10/1/17 2,288,450
Aaa AAA 935 North Carolina Medical
Care Commission,
Memorial Mission
Hospital, (FSA), 0%,
10/1/06 530,836
Aaa AAA 5,000 North Carolina Medical
Care Commission, St.
Joseph's Medical Center,
(AMBAC), 5.10%, 10/1/14 4,579,600
-----------
$ 15,690,346
-----------
INSURED LEASE/CERTIFICATES OF
PARTICIPATION - 8.4%
Aaa AAA $4,500 Charlotte, Convention
Facility, (AMBAC),
5.25%, 12/1/13 $ 4,232,070
Aaa AAA 1,475 Concord County, (MBIA),
5.75%, 6/1/16 1,442,521
Aaa AAA 1,750 Duplin County, (FGIC),
5.25%, 8/1/14 1,623,335
Aaa AAA 1,575 Franklin, (FGIC),
6.625%, 6/1/14 1,676,493
</TABLE>
67
<PAGE> 68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED LEASE/CERTIFICATES OF
PARTICIPATION - (CONTINUED)
Aaa AAA 5,000 Iredell County, Iredell-
Statesville Schools,
(FGIC), 6.125%, 6/1/07 5,213,450
Aaa AAA 1,000 Mooresville School
District, (AMBAC),
6.35%, 10/1/14 1,046,130
-----------
$ 15,233,999
-----------
INSURED UTILITIES - 6.6%
Aaa AAA $5,500 North Carolina Municipal
Power Authority, Catawba
Electric, (AMBAC),
5.75%, 1/1/15 $ 5,413,870
Aaa AAA 4,000 North Carolina Municipal
Power Authority, Catawba
Electric, (MBIA), 6.72%,
1/1/12 (1) 3,651,000
Aaa AAA 1,500 North Carolina Eastern
Municipal Power
Authority, (FSA),
Variable, 1/1/19 (1) 1,397,190
Aaa AAA 1,400 Puerto Rico Electric
Power Authority,
(Stripes), (FSA),
Variable, 7/1/02 (1) 1,494,178
-----------
$ 11,956,238
-----------
LEASE/CERTIFICATES OF
PARTICIPATION - 3.7%
A1 A- $2,065 Buncombe County,
6.625%, 12/1/10 $ 2,207,133
NR AA 825 Durham County, 6.10%,
7/15/07 869,080
Aa AA 985 Durham County, 6.75%,
12/1/11 1,059,762
A1 AA 2,400 Greensboro, Greensboro
Coliseum Arena, 6.75%,
12/1/09 2,577,624
-----------
$ 6,713,599
-----------
SPECIAL TAX REVENUE - 2.9%
Baa1 BBB+ $ 200 Puerto Rico Finance
Authority, 7.90%, 7/1/07 $ 214,378
Baa1 A 4,000 Puerto Rico Highway and
Transportation
Authority, 5.25%, 7/1/20 3,626,600
Baa1 A 1,490 Puerto Rico Highway and
Transportation
Authority, 5.50%, 7/1/15 1,435,764
-----------
$ 5,276,742
-----------
TRANSPORTATION - 0.6%
NR BBB $1,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 1,010,070
-----------
UTILITIES - 9.1%
A2 A $1,015 Chatham County
Industrial Facilities
and Pollution, Carolina
Power & Light, 6.30%,
6/15/14 $ 1,079,960
A A- 550 North Carolina Municipal
Power Authority, Catawba
Electric, 7.00%, 1/1/16 568,062
A BBB+ 3,200 North Carolina Municipal
Power, Eastern Power,
6.00%, 1/1/26 3,096,864
A BBB+ 5,000 North Carolina Municipal
Power, Eastern Power,
6.125%, 1/1/09 5,092,600
Baa1 BBB+ 2,000 Puerto Rico Electric
Power Authority, 0%,
7/1/17 555,240
Baa1 BBB+ 1,000 Puerto Rico Electric
Power Authority, 5.25%,
7/1/21 886,100
Baa1 BBB+ 3,000 Puerto Rico Electric
Power Authority, 5.50%,
7/1/25 2,719,260
Baa1 BBB+ 2,000 Puerto Rico Electric
Power Authority, 6.00%,
7/1/16 1,965,680
Baa1 BBB+ 365 Puerto Rico Electric
Power Authority, 7.125%,
7/1/14 389,908
NR NR 250 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 263,190
-----------
$ 16,616,864
-----------
WATER AND SEWER - 1.0%
Aa AA $2,000 Orange County, Water &
Sewer, 5.20%, 7/1/16 $ 1,830,920
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$173,941,735) $181,843,539
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by North Carolina
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at August 31, 1996, 25.5% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 2.9% to 11.3% of total investments.
See notes to financial statements
68
<PAGE> 69
- --------------------------------------------------------------------------------
Oregon Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
COGENERATION - 1.7%
NR NR $2,000 Western Generation
Agency, Wauna
Cogeneration Project,
(AMT), 7.40%, 1/1/16 $ 2,102,220
-----------
EDUCATION - 2.8%
NR A+ $2,750 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority, Reed College
Project, 5.375%, 7/1/25 $ 2,491,032
A NR 1,000 City of Salem,
Educational Facilities,
Willamette University
Project, 6.10%, 4/1/14 1,006,420
-----------
$ 3,497,452
-----------
ESCROWED - 3.7%
A1 AAA $2,000 City of Medford, Rogue
Valley Memorial
Hospital, 6.25%, 12/1/07 $ 2,180,400
NR A+ 1,250 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority, Reed College
Project, 6.75%, 7/1/21 1,378,150
NR AAA 200 Commonwealth of Puerto
Rico, Highway &
Transportation
Authority, 6.625%,
7/1/18 221,468
Baa1 A 800 Commonwealth of Puerto
Rico, Highway &
Transportation
Authority, 6.625%,
7/1/18 881,568
-----------
$ 4,661,586
-----------
GENERAL OBLIGATIONS - 13.7%
Aa AA+ $1,000 Tri County Metropolitan
Transportation District,
Light Rail Extension,
6.00%, 7/1/12 $ 1,026,880
Aa NR 2,000 Lane County, City of
Eugene, School District,
5.375%, 7/1/13 1,942,720
Aa AA- 1,000 State of Oregon,
Veterans' Welfare Bonds,
9.00%, 4/1/04 1,248,800
Aa AA- 1,000 State of Oregon, Board
of Higher Education,
6.00%, 10/15/18 1,010,600
Aa AA- 1,250 State of Oregon, Elderly
and Disabled Housing,
6.375%, 8/1/24 1,309,487
Aa AA- 5,110 State of Oregon, Elderly
and Disabled Housing,
(AMT), 5.65%, 8/1/26 4,896,606
Aa AA- 1,500 State of Oregon,
Veterans' Welfare Bonds,
5.875%, 10/1/18 1,515,120
Aa AA- 1,225 State of Oregon,
Veterans' Welfare Bonds,
5.85%, 10/1/15 1,222,146
Baa1 A 1,000 Commonwealth of Puerto
Rico Aqueduct and Sewer
Authority, 6.25%, 7/1/12 1,064,270
Baa1 A 2,000 Commonwealth of Puerto
Rico Public Building
Authority, 5.75%, 7/1/15 1,935,100
-----------
$ 17,171,729
-----------
HOSPITALS - 1.6%
NR A $1,000 Benton County, Good
Samaritan Hospital
Corvallis, 6.25%,
10/1/09 $ 1,010,660
Aa3 AA 1,000 Clackamas County, Kaiser
Permanente, 6.25%,
4/1/21 1,039,170
-----------
$ 2,049,830
-----------
HOUSING - 15.7%
Aa NR $2,500 State of Oregon, Housing
and Community Services
Department, MFMR,
6.875%, 7/1/28 $ 2,595,200
NR A 1,750 City of Portland Housing
Authority, MFMR,
Riverwood Project,
6.00%, 1/1/19 1,716,085
Aaa NR 2,875 City of Portland Housing
Authority, MFMR, Cherry
Blossom Apartments,
(AMT), 6.20%, 12/20/36 2,879,830
Aa NR 1,055 State of Oregon, Housing
and Community Services
Department, SFMR, (AMT),
6.80%, 7/1/27 1,081,364
Aa NR 1,475 State of Oregon, Housing
and Community Services
Department, SFMR,
5.375%, 7/1/17 1,394,539
Aa NR 2,500 State of Oregon, Housing
and Community Services
Department, SFMR, (AMT),
6.45%, 7/1/26 2,519,050
Aa NR 2,000 State of Oregon, Housing
and Community Services
Department, SFMR, (AMT),
6.40%, 7/1/26 2,007,500
</TABLE>
69
<PAGE> 70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - (CONTINUED)
Aa NR 2,000 State of Oregon Housing
and Community Services
Department, SFMR, (AMT),
6.20%, 7/1/27 1,967,380
Aa NR 3,500 State of Oregon Housing
and Community Services
Department, SFMR, (AMT),
6.375%, 7/1/27 3,515,435
-----------
$ 19,676,383
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 8.2%
Baa2 BBB- $3,500 Oregon Economic
Developments Authority,
Georgia Pacific, (AMT),
6.35%, 8/1/25 $ 3,490,515
NR BBB- 5,000 Port of Astoria, PCR,
James River Project,
6.55%,
2/1/15 (2) 4,978,400
NR NR 750 Port of Portland, Ash
Grove Cement Co., 7.25%,
10/1/09 812,948
Baa1 A 1,000 Port of Portland, North
Portland Crown
Zellerbach Corporation,
6.125%, 5/15/08 987,990
-----------
$ 10,269,853
-----------
INSURED TRANSPORTATION - 5.4%
Aaa AAA $1,000 Port of Portland,
Portland International
Airport, (AMT), (AMBAC),
6.25%, 7/1/18 $ 1,056,040
Aaa AAA 2,750 Port of Portland,
Portland International
Airport, (AMT), (FGIC)
6.00%, 7/1/23 2,849,193
Aaa AAA 1,250 Port of Portland,
Portland International
Airport, (AMT), (FGIC)
5.75%, 7/1/25 1,218,975
Aaa AAA 1,500 Oregon Department of
Transportation, Westside
Light Rail, (MBIA)
6.25%, 6/1/09 1,600,110
-----------
$ 6,724,318
-----------
INSURED EDUCATION - 2.0%
Aaa AAA $1,000 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority, Lewis and
Clark College, (MBIA)
6.00%, 10/1/13 $ 1,025,780
Aaa AAA 1,500 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority, Lewis and
Clark College, (MBIA)
6.125%, 10/1/24 1,540,155
-----------
$ 2,565,935
-----------
INSURED GENERAL
OBLIGATIONS - 3.2%
Aaa AAA $1,000 Multnomah County,
Parkrose School
District, (FGIC) 5.70%,
12/1/09 $ 1,025,430
Aaa AAA 1,000 Yamhill, Clackamas &
Washington Counties,
Newberg School Dist.,
(FSA) 5.50%, 6/1/10 1,001,770
Aaa AAA 2,000 Commonwealth of Puerto
Rico, (AMBAC), Variable,
7/1/15 (1) 1,983,280
-----------
$ 4,010,480
-----------
INSURED HOSPITALS - 2.9%
Aaa AAA $3,630 Oregon Health Science
University, Capital
Appreciation, (MBIA),
0%, 7/1/21 $ 818,819
Aaa AAA 2,000 Oregon Health Science
University, Capital
Appreciation, (MBIA),
5.25%, 7/1/28 1,795,700
Aaa AAA 1,000 Western Lane Hospital
District Authority,
Sisters of St. Joseph of
Peace, (MBIA) 5.75%,
8/1/19 978,760
-----------
$ 3,593,279
-----------
</TABLE>
70
<PAGE> 71
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED LEASE/
CERTIFICATES OF
PARTICIPATION - 4.7%
Aaa AAA $1,250 State of Oregon,
Department of General
Services, Real Property
Financing Program,
(AMBAC) 6.25%, 9/1/15 $ 1,299,825
Aaa AAA 1,500 State of Oregon,
Department of General
Services, Real Property
Financing Program,
(MBIA), 6.25%, 11/1/19 1,559,910
Aaa AAA 2,200 State of Oregon,
Department of
Administration, (MBIA),
5.50%, 11/1/20 2,095,412
Aaa AAA 1,000 State of Oregon,
Department of
Administration, (MBIA),
5.70%, 5/1/16 984,820
-----------
$ 5,939,967
-----------
INSURED UTILITIES - 3.2%
Aaa AAA $1,000 Emerald People's Utility
District, Electric
System, (AMBAC) 5.75%,
11/1/16 $ 998,720
Aaa AAA 1,000 City of Eugene, Electric
Utility Revenue, (MBIA),
5.80%, 8/1/22 1,008,930
Aaa AAA 500 Commonwealth of Puerto
Rico, Electric Power
Authority, (FSA),
Variable, 7/1/03 (1) 537,365
Aaa AAA 1,600 Commonwealth of Puerto
Rico, Telephone
Authority, (MBIA),
Variable, 1/16/15 (1) 1,446,400
-----------
$ 3,991,415
-----------
INSURED WATER & SEWER - 5.2%
Aaa AAA $1,000 City of Beaverton,
Washington County, Water
Revenue,
(FSA) 6.125%, 6/1/14 $ 1,031,320
Aaa AAA 1,500 City of Portland, Sewer
System, (FGIC) 6.00%,
10/1/12 1,546,305
Aaa AAA 1,000 South Fork Water Board,
First Lien Water
Revenue, (FSA) 6.00%,
2/1/14 1,028,140
Aaa AAA 1,375 Washington County,
Unified Sewerage Agency,
Senior Lien, (AMBAC),
6.125%, 10/1/12 1,430,344
Aaa AAA 1,500 Washington County,
Unified Sewerage Agency,
(AMBAC), 6.125%, 10/1/12 1,560,375
-----------
$ 6,596,484
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 1.9%
A A $1,000 Metro Regional Center
Project, Certificate of
Participation, 5.25%,
8/1/22 $ 889,970
Aa A 1,500 Multnomah County,
Certificates of
Participation, Juvenile
Justice Complex, 6.00%,
8/1/12 1,524,435
-----------
$ 2,414,405
-----------
POOLED LOAN - 1.1%
A1 NR $1,500 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority, Oregon Coast
Aquarium, 5.25%, 10/1/13 $ 1,436,340
-----------
SPECIAL TAX REVENUE - 7.2%
A NR $1,000 City of Portland, Urban
Renewal and
Redevelopment Bonds,
Downtown Waterfront
Project, 6.40%, 6/1/08 $ 1,058,780
Baa1 A 500 Commonwealth of Puerto
Rico, Highway and
Transportation
Authority, 6.375%,
7/1/08 530,300
Baa1 A 1,720 Commonwealth of Puerto
Rico Highway and
Transportation
Authority, 5.25%, 7/1/20 1,559,438
Baa1 A 2,000 Commonwealth of Puerto
Rico Highway and
Transportation
Authority, 5.50%, 7/1/17 1,895,440
</TABLE>
71
<PAGE> 72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIAL TAX REVENUE - (CONTINUED)
Baa1 A 1,250 Commonwealth of Puerto
Rico Highway and
Transportation
Authority, 5.00%, 7/1/36 1,064,650
A1 AA 3,000 Tri-County Metropolitan
Transportation District,
Limited Tax Pledge,
5.70%, 8/1/13 2,974,110
-----------
$ 9,082,718
-----------
TRANSPORTATION - 4.0%
Ba2 BB+ $1,500 Port of Portland,
Special Obligation
Revenue Bonds, Delta
Airlines Inc. Project,
(AMT), 6.20%, 9/1/22 $ 1,465,935
NR BBB 2,000 Guam Airport Authority,
6.50%, 10/1/23 2,013,460
NR BBB 1,500 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 1,515,105
-----------
$ 4,994,500
-----------
UTILITIES - 9.0%
A1 AA $1,500 City of Eugene, Electric
Utility System, 6.00%,
8/1/11 $ 1,519,200
A1 AA 4,055 City of Eugene, Electric
Utility System, 5.75%,
8/1/16 4,021,506
Aa AA- 4,000 City of Eugene, Trojan
Nuclear Power Project,
5.90%, 9/1/09 (2) 3,942,960
Aa AA- 1,500 Northern Wasco County,
People's Utility
District, McNary Dam
Fishway Hydroelectric
Project, Bonneville
Power Administration,
5.20%, 12/1/24 1,345,005
A A+ 500 Commonwealth of Puerto
Rico, Telephone
Authority, Variable,
1/1/20 (1) 510,155
-----------
$ 11,338,826
-----------
WATER & SEWER - 2.8%
NR A+ $2,000 Clackamus County, Water
Revenue, 6.375%, 10/1/14 $ 2,094,440
A A+ 1,500 City of Gresham, Water
Revenue, 5.20%, 11/1/10 1,444,590
-----------
$ 3,539,030
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$122,520,158) $125,656,750
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax
The Portfolio invests primarily in debt securities issued by Oregon
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 August 31, 1996, 25.4% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 2.9% to 11.8% of total investments.
See notes to financial statements
72
<PAGE> 73
- --------------------------------------------------------------------------------
South Carolina Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 2.8%
NR A $1,500 SC Education Authority,
Student Loan, (AMT),
6.30%, 9/1/08 $ 1,521,540
-----------
ESCROWED - 1.9%
Aaa AAA $ 955 Charleston SC COP (MBIA),
7.00%, 6/1/19 $ 1,087,936
-----------
HOSPITALS - 6.8%
Aa AA- $1,500 Greenville Hospital
System Board of Trustees,
5.25%, 5/1/17 $ 1,361,070
Baa1 NR 1,500 Horry County, Conway
Hospital, 6.75%, 7/1/12 1,522,515
NR AAA 1,000 SC Jobs Economic
Developement, Oconee
Memorial Hospital,
6.150%, 3/1/25 1,002,280
-----------
$ 3,885,865
-----------
HOUSING - 13.7%
NR AA $ 985 South Carolina HFA, MFMR,
Westbury Place, 6.05%,
7/1/27 $ 963,369
NR BBB+ 1,000 South Carolina HFA, MFMR,
Hunting Ridge, (AMT),
6.75%, 6/1/25 1,002,120
NR AA- 1,780 South Carolina HFA, MFMR,
Runaway Bay Apt. Project,
6.20%, 12/1/20 1,738,366
Aa AA 1,500 South Carolina HFA, SFMR,
6.375%, 7/1/16 1,513,440
Aa NR 1,500 South Carolina HFA, SFMR,
6.45%, 7/1/17 1,531,530
Aa NR 1,000 South Carolina HFA, SFMR,
(AMT), 6.75%, 7/1/26 1,024,370
-----------
$ 7,773,195
-----------
INDUSTRIAL DEVELOPMENT - 29.5%
Baa2 BBB $1,890 Aiken County, Beloit
Corporation, 6.00%,
12/1/11 $ 1,863,824
NR BBB+ 1,500 Chester County, 7.35%,
2/1/14 1,604,640
A1 AA- 1,500 Darlington County, Nucor
Corporation, (AMT),
5.75%, 8/1/23 1,417,695
A2 A 500 Darlington County, Sonoco
Products, (AMT), 6.125%,
6/1/25 503,655
A2 A 2,500 Darlington County, Sonoco
Products, (AMT), 6.0%,
4/1/26 2,489,550
Aa3 AA 500 Florence County,
Pollution Control, E.I.
du Pont de Nemours & Co.,
6.35%, 7/1/22 520,445
NR NR 600 Florence County, Stone
Container Project,
7.375%, 2/1/07 615,066
Baa3 BB+ 1,500 Puerto Rico Port
Authority, American
Airlines Project, (AMT),
6.25%, 6/1/26 1,489,785
A1 A- 2,665 Richland County,
Pollution Control, Union
Camp Corporation, (AMT),
6.75%, 5/1/22 2,794,279
NR NR 1,500 Spartanburg County, Solid
Waste, Bavarian Motor
Works Corp., (AMT),
7.55%, 11/1/24 1,597,200
A2 A+ 2,000 York County, Hoechst
Celanese Corporation,
(AMT), 5.70%, 1/1/24 1,876,400
-----------
$16,772,539
-----------
INSURED GENERAL
OBLIGATION - 1.8%
Aaa AAA $1,000 Berkeley County School
District, (AMBAC), 6.30%,
2/1/16 $ 1,042,410
-----------
INSURED HEALTHCARE - 4.7%
Aaa AAA $3,000 South Carolina Jobs-EDA,
Anderson Area Med Center,
(MBIA), 5.25%, 2/1/26 $ 2,675,610
-----------
INSURED HOSPITAL - 8.0%
Aaa AAA $1,000 Florence County, McLeod
Medical Center, (FGIC),
5.25%, 11/1/09 $ 931,480
Aaa AAA 1,500 Greenwood County, Self
Memorial Hospital,
(FGIC), 5.875%, 10/1/17 1,490,055
Aaa AAA 300 Lexington County Health
Services District, Inc.,
(FSA), 6.75%, 10/1/18 318,108
Aaa AAA 1,000 South Carolina Jobs-EDA,
Baptist Hospital,
(AMBAC), 5.45%, 8/1/15 943,640
Aaa AAA 1,000 South Carolina Jobs-EDA,
Baptist Hospital,
(AMBAC), Variable, 8/1/15
(1) 880,220
-----------
$ 4,563,503
-----------
</TABLE>
73
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED LEASE/
CERTIFICATE OF
PARTICIPATION - 4.4%
Aaa AAA $ 500 Charleston County,
(MBIA), 6.10%, 6/1/11 $ 518,895
Aaa AAA 45 Charleston County,
(MBIA), 7.00%, 6/1/19 49,524
Aaa AAA 1,000 Florence County, Law
Center, (AMBAC), 6.00%,
3/1/14 1,011,910
Aaa AAA 900 North Charleston,
Coliseum Capital
Improvements, (FGIC),
6.00%, 1/1/11 909,882
-----------
$ 2,490,211
-----------
INSURED UTILITIES - 7.8%
Aaa AAA $ 300 Piedmont Municipal Power
Agency, (MBIA),
6.25%, 1/1/09 $ 321,027
Aaa AAA 1,000 Piedmont Municipal Power
Agency, (MBIA),
6.30%, 1/1/14 1,027,220
Aaa AAA 1,000 South Carolina Public
Service Authority, Santee
Cooper, (AMBAC),
5.00%, 1/1/14 905,100
Aaa AAA 1,000 South Carolina Public
Service Authority, Santee
Cooper, (MBIA),
5.125%, 1/1/32 868,230
Aaa AAA 1,250 South Carolina Public
Service Authority,
(AMBAC), 6.375%, 7/1/21 1,289,800
-----------
$ 4,411,377
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 4.6%
Baa NR $ 750 Lexington School
District, 6.90%, 7/1/08 $ 782,490
Baa1 BBB+ 1,750 Myrtle Beach Convention
Center, 6.875%, 7/1/17 1,802,483
-----------
$ 2,584,973
-----------
POOLED LOANS - 0.5%
NR A+ $ 300 SC Resource Authority,
Local Government Program,
7.00%, 4/1/13 $ 308,757
-----------
UTILITIES - 13.5%
A2 A- $1,650 Berkeley County, South
Carolina Electric & Gas
Company, 6.50%, 10/1/14 $ 1,745,914
A2 A 1,500 Darlington County,
Carolina Power & Light
Company, 6.60%, 11/1/10 1,595,700
Baa1 BBB 500 Piedmont Municipal Power
Agency, 5.75%, 1/1/24 464,310
Baa1 A- 1,400 Puerto Rico Electric
Power Authority, 6.250%,
7/1/17 1,412,754
Baa1 A- 500 Puerto Rico Electric
Power Authority, 6.375%,
7/1/24 511,845
Baa1 A- 4,000 Puerto Rico Electric
Power Authority, 0%,
7/1/17 1,110,480
Aa A+ 1,000 South Carolina Public
Service Authority,
5.125%, 1/1/32 840,380
-----------
$ 7,681,383
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$54,923,381) $56,799,299
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by South Carolina
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at August 31, 1996, 26.6% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 0.6% to 11.5% of total investments.
See notes to financial statements
74
<PAGE> 75
- --------------------------------------------------------------------------------
Tennessee Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 1.8%
Baa NR $1,000 Nashville and Davidson
County, Belmont
University, 6.40%,
12/1/19 $ 1,008,841
-----------
ESCROWED - 2.7%
Aaa AAA $1,500 Shelby County, Lebonheur
Children's Hospital,
(MBIA) 5.50%, 8/15/12 $ 1,499,941
-----------
GENERAL OBLIGATIONS - 5.0%
Aa AA $1,000 Metro Government
Nashville & Davidson
County, 5.875%, 5/15/21 $ 991,511
Aa AA+ 1,000 Shelby County Series
1993, 5.125%, 3/1/16 921,800
Baa1 A 1,000 Commonwealth of Puerto
Rico Aqueduct and Sewer
Auth, 5.00%, 7/1/15 900,530
-----------
$ 2,813,841
-----------
HOSPITALS - 4.1%
Baa1 NR $ 500 City of Clarksville,
Clarksville Memorial,
6.25%, 7/1/08 $ 495,420
Baa1 NR 500 City of Clarksville,
Clarksville Memorial,
6.375%, 7/1/18 485,901
Baa1 BBB+ 250 Knox County, East
Tennessee Children's,
6.50%, 10/1/12 248,998
NR A- 1,000 Sumner County, Sumner
Regional Health Systems,
7.50%, 11/1/14 (4) 1,077,220
-----------
$ 2,307,539
-----------
HOUSING - 14.6%
NR AAA $ 500 Knoxville Community
Development Corp.,
Morningside Gardens,
(GNMA) 6.10%, 7/20/20 $ 496,846
NR A 750 Knoxville Community
Development Corp.,
Clinton Towers, 6.65%,
10/15/10 764,498
NR A 1,645 Nashville and Davidson
County, The Park at
Hermitage, 5.90%, 2/1/19 1,525,606
Aa A+ 445 TN HDA, Homeownership
Program, 6.80%, 7/1/17 457,968
A1 A+ 2,000 TN HDA, Mortgage Finance
Program, 5.85%, 7/1/13 2,005,260
A1 A+ 2,000 TN HDA, Mortgage Finance
Program, 5.95%, 7/1/28 1,982,860
Aa AA 1,000 TN HDA, Homeownership
Program, (AMT) 5.75%,
7/1/24 972,860
-----------
$ 8,205,898
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 24.6%
Aa3 AA $1,000 City of Chattanooga,
E.I. du Pont de Nemours
and Company, 6.35%,
7/1/22 $ 1,049,160
Aa2 AA- 1,000 Humphreys County, E.I.
du Pont de Nemours and
Company, (AMT) 6.70%,
5/1/24 1,055,880
Aa2 AA 2,000 Loudon County, Kimberly-
Clark Corp., (AMT)
6.20%, 2/1/23 (2) 2,003,740
NR A- 2,750 Maury County, Saturn
Corporation, 6.50%,
9/1/24 (4) 2,831,346
Baa1 BBB 1,500 McMinn County, Calhoun
Newsprint Company,
Bowater Incorporated
Obligor, (AMT) 7.40%,
12/1/22 1,597,636
Baa2 BBB 1,500 Memphis-Shelby County
Airport Authority,
Federal Express Corp.,
6.75%, 9/1/12 1,554,211
Baa2 BBB 1,000 Memphis-Shelby County
Airport Authority,
Federal Express Corp.,
(AMT) 6.20%, 7/1/14 993,501
NR BBB+ 500 Nashville and Davidson
County, Osco Treatment
Systems, (AMT) 6.00%,
5/1/03 501,310
Baa3 BB+ 1,250 Commonwealth of Puerto
Rico Port Authority,
American Airlines (AMT),
6.25%, 6/1/26 1,241,488
A3 NR 1,000 South Fulton County,
Tyson Foods Co., 6.40%,
10/1/20 998,710
-----------
$ 13,826,982
-----------
</TABLE>
75
<PAGE> 76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED EDUCATION - 6.4%
Aaa AAA $1,500 Jackson Health,
Education and Housing,
Lambuth Univ (FSA),
5.90%, 9/1/20 $ 1,455,090
Aaa AAA 1,230 Metro Nashville Health
and Education, Meharry
Medical College (AMBAC),
6.00%, 12/1/19 (3) 1,254,712
Aaa AAA 1,000 Metro Nashville Health
and Education, Meharry
Medical College (AMBAC),
5.00%, 12/1/24 (3) 878,130
-----------
$ 3,587,932
-----------
INSURED GENERAL
OBLIGATION - 0.5%
Aaa AAA $ 300 Commonwealth of Puerto
Rico, (AMBAC) 7/1/15,
(1) $ 297,492
-----------
INSURED HOUSING - 1.9%
Aaa AAA $1,000 Knox County, SCA Realty
Multifamily Mortgage
Receipts, (FSA) 7.125%,
1/1/30 $ 1,077,540
-----------
INSURED
HOSPITALS - 12.2%
Aaa AAA $ 500 City of Bristol, Bristol
Memorial, (FGIC) 6.75%,
9/1/10 $ 556,286
Aaa AAA 1,000 City of Bristol, Bristol
Memorial, (FGIC) 5.125%,
9/1/13 920,570
Aaa AAA 250 City of Chattanooga,
Memorial Hospital
Project, (MBIA) 6.625%,
9/1/09 275,126
Aaa AAA 2,000 City of Jackson,
Jackson-Madison County
General Hospital,
(AMBAC) 5.625%, 4/1/15 1,933,961
Aaa AAA 1,500 City of Johnson, Johnson
City Medical Center,
(MBIA) 5.00%, 7/1/13 1,352,640
Aaa AAA 2,000 Knox County, Fort
Sanders Alliance
Obligated Group, (MBIA)
5.25%, 1/1/23 1,807,440
-----------
$ 6,846,023
-----------
INSURED SPECIAL TAX
- 3.7%
Aaa AAA $1,000 City of Johnson, School
District Sales Tax,
(AMBAC) 6.70%, 5/1/21 $ 1,076,450
Aaa AAA 1,000 Nashville Sports
Authority Stadium
Project-1996 (AMBAC),
5.875%, 7/1/21 991,510
-----------
$ 2,067,960
-----------
INSURED TRANSPORTATION
- 1.9%
Aaa AAA $1,000 Memphis-Shelby County
Airport Authority,
(MBIA), (AMT) 6.50%,
2/15/09 $ 1,064,130
-----------
INSURED UTILITIES - 7.2%
Aaa AAA $ 750 City of Dickson,
Electric System
Revenues-1996 (MBIA),
5.50%, 9/1/16 $ 715,890
Aaa AAA 1,000 City of Lawrenceburg
Electric Revenues
(MBIA), 6.625, 7/1/18 1,102,600
Aaa AAA 1,000 City of Lawrenceburg
Electric Revenues
(MBIA), 5.50%, 6/1/26 940,081
Aaa AAA 1,000 Madison County Suburban
Utility District, (MBIA)
5.00%, 2/1/19 894,560
Aaa AAA 400 Commonwealth of Puerto
Rico, Electric Power
Authority, (FSA) 7/1/03
(1) 429,892
-----------
$ 4,083,023
-----------
INSURED WATER & SEWER
- 2.3%
Aaa AAA $ 350 Nashville and Davidson
Counties, Water System,
(AMBAC) 1/1/22 (1) $ 349,018
Aaa AAA 1,000 Nashville and Davidson
Counties, Water System,
(FGIC) 5.20%, 1/1/13 953,370
-----------
$ 1,302,388
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 0.9%
A NR $ 500 Wilson County
Educational Facilities
Corporation, 6.125%,
6/30/10 $ 511,230
-----------
</TABLE>
76
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
POOLED LOANS - 3.3%
A AA- $ 700 Tennessee Local
Development Authority,
State Loan Program,
5.00%, 3/1/15 $ 631,113
NR A- 1,200 Tennessee Local
Development Authority,
Community Provider,
6.55%, 10/1/23 1,223,832
-----------
$ 1,854,945
-----------
NURSING HOMES - 1.8%
NR A+ $1,000 Tennessee State
Veterans' Homes Board,
Humboldt Project, 6.65%,
2/1/14 (4) $ 1,021,560
-----------
SPECIAL TAX - 2.4%
Baa1 A $1,575 Commonwealth of Puerto
Rico Highway and Trans
Auth, 5.00%, 7/1/36 $ 1,341,452
-----------
TRANSPORTATION - 1.8%
NR BBB $1,000 Guam Airport Authority,
(AMT) 6.70%, 10/1/23 $ 1,010,061
-----------
WATER & SEWER - 0.9%
NR BBB+ $ 250 Hamilton County,
Eastside Utility
District, 6.50%, 11/1/05 $ 263,845
NR BBB+ 250 Hamilton County,
Eastside Utility
District, 6.75%, 11/1/11 261,195
-----------
$ 525,040
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$55,475,532) $ 56,253,836
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
(3) When-issued security.
(4) Security has been segregated to cover when-issued securities.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Tennessee
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 August 31, 1996, 38.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregated percentage insured by
financial institutions ranged from 4.3% to 17.2% of total investments.
See notes to financial statements
77
<PAGE> 78
- --------------------------------------------------------------------------------
Virginia Municipals Portfolio
Portfolio of Investments - August 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 100%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 6.1%
NR A- $2,000 City of Lynchburgh, IDA,
Randolph-Macon Woman's
College, 5.875%, 9/1/23 $ 1,979,940
Baa NR 2,220 Rockingham County, IDA,
Bridgewater College,
5.95%, 10/1/13 2,161,903
NR A- 1,570 VA College Building
Authority, Hampden-
Sydney College, 6.60%,
9/1/16 1,636,756
NR A+ 400 VA College Building
Authority, Hampton
University, 6.50%,
4/1/08 420,192
NR BBB- 1,150 VA College Building
Authority, Marymount
University, 7.00%,
7/1/12 1,214,964
NR BBB- 2,200 VA College Building
Authority, Marymount
University, 7.00%,
7/1/22 2,306,150
NR A+ 1,000 VA College Building
Authority, Hampton
University, 5.75%,
4/1/14 982,600
-----------
$ 10,702,505
-----------
ESCROWED - 2.4%
Aaa NR $1,000 Arlington County, IDA,
Arlington Hospital,
7.125%, 9/1/21 $ 1,121,630
A NR 500 Augusta County, IDA,
Augusta Hospital, 7.00%,
9/1/21 556,885
NR NR 600 Prince William County,
IDA, Virginia Commuter
Parking Facilities
Lease, 7.25%, 3/1/11 659,514
NR A+ 1,700 City of VA Beach, VA
Water and Sewer System,
6.625%, 2/1/17 1,866,413
-----------
$ 4,204,442
-----------
GENERAL OBLIGATIONS - 3.9%
Aaa AAA $1,000 Fairfax County, 5.625%,
6/1/14 $ 991,590
A1 AA 500 City of Richmond, 6.25%,
1/15/18 516,070
Aa AA 1,000 Roanoke County, 5.00%,
6/1/21 888,310
Baa1 A 350 Commonwealth of Puerto
Rico, 0%, 7/1/04 231,581
NR NR 4000 Virgin Island, 7.25%,
10/1/18 4,214,040
-----------
$ 6,841,591
-----------
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - 18.3%
A NR $3,800 Albermarle County, IDA,
Martha Jefferson
Hospital, 5.50%, 10/1/20 $ 3,500,522
A NR 315 Chesapeake Hospital
Authority, Chesapeake
General Hospital, 7.60%,
7/1/00 339,283
Aa AA 2,500 Fairfax County, IDA,
Inova Health System
Hospitals, 5.00%,
8/15/23 2,164,975
Aa AA 2,910 Fairfax County, IDA,
Inova Health System
Hospitals, 5.00%,
8/15/14 2,634,307
Aa AA 2,000 Fairfax County, IDA,
Inova Health System
Hospitals, 5.00%,
8/15/15 1,794,120
Aa AA 1,000 Fairfax County, IDA,
Inova Health System
Hospitals, 6.00%,
8/15/26 991,710
NR A- 2,000 Medical College of
Hampton Roads, 6.875%,
11/15/11 2,127,540
A A 1,250 City of Martinsville,
IDA, Memorial Hospital
of Martinsville and
Henry County, 7.00%,
1/1/06 1,303,087
Aa AA 3,000 Norfolk County, IDA,
Sentara Health System,
5.00%, 11/1/20 2,609,310
Aa AA 2,000 Norfolk County, IDA,
Sentara Health System,
5.50%, 11/1/17 1,878,600
Aa AA- 3,500 Peninsula Ports
Authority of Virginia,
Riverside Health System,
6.625%, 7/1/10 3,670,170
A NR 2,400 Prince William County,
IDA, Potomac Hospital,
6.85%, 10/1/25 2,498,088
Aa AA 3,000 Virginia Beach
Development Authority,
Sentara Bayside
Hospital, 6.60%, 11/1/09 3,169,140
A NR 1,060 Washington County, IDA,
Johnston Memorial
Hospital, 7.00%, 7/1/22 1,125,275
A NR 1,000 Washington County, IDA,
Johnston Memorial
Hospital, 6.25%, 7/1/06 1,046,960
A NR 1,000 Washington County, IDA,
Johnston Memorial
Hospital, 6.00%, 7/1/14 994,490
-----------
$ 31,847,577
-----------
</TABLE>
78
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - 13.3%
NR AAA $1,250 Fairfax County
Redevelopment and
Housing Authority, Multi
Family Mortgage Revenue,
(FHA), 7.00%, 5/1/26 $ 1,335,363
NR AAA 1,000 Hampton Redevelopment
and Housing Authority,
Senior Living, (GNMA),
6.00%, 1/20/26 994,440
NR AAA 1,800 Suffolk Redevelopment
and Housing Authority,
Prince Williams Commons,
(FNMA), 6.45%, 6/1/19 1,814,922
Aa1 AA+ 5,000 VA HDA, Multi Family
Mortgage Revenue, (AMT),
6.75%, 7/1/21 5,201,000
Aa AA+ 3,500 VA HDA, Multi Family
Mortgage Revenue, 7.05%,
5/1/18 3,683,085
Aa1 AA+ 3,000 VA HDA, Single Family
Mortgage Revenue, 7.10%,
1/1/22 3,151,200
Aa1 AA+ 2,350 VA HDA, Single Family
Mortgage Revenue, 7.10%,
1/1/17 2,475,490
Aa1 NR 2,500 VA HDA, Single Family
Mortgage Revenue, 6.85%,
1/1/15 2,612,100
Aa NR 1,900 VA HDA, Single Family
Mortgage Revenue,
Variable, 7/1/04 (1) 1,863,520
-----------
$ 23,131,120
-----------
INDUSTRIAL DEVELOPMENT
REVENUE - 11.9%
Aa NR $2,190 City of Chesapeake,
Cargill Inc., 5.875%,
3/1/13 $ 2,208,987
A2 A+ 3,000 City of Giles, Hoechst
Celanese Corporation,
(AMT), 5.95%, 12/1/25 2,856,300
A2 A+ 2,000 City of Giles, Hoechst
Celanese Corporation,
6.45%, 5/1/26 2,024,280
A2 A+ 1,000 City of Giles, Hoechst
Celanese Corporation,
(AMT), 6.625%, 12/1/22 1,029,560
A2 A 2,000 Henrico County, Browning
Ferris Inc., (AMT),
5.45%, 1/1/14 (2) 1,900,900
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
A1 A- 4,000 Isle of Wright County,
Union Camp Corporation,
(AMT), 6.55%, 4/1/24 4,114,200
Baa3 BBB 5,520 West Point, Chesapeake
Corporation, (AMT),
6.375%, 3/1/19 5,545,226
Baa3 BBB 980 West Point, Chesapeake
Corporation, 6.25%,
3/1/19 986,252
-----------
$ 20,665,705
-----------
INSURED GENERAL OBLIGATION - 2.5%
Aaa AAA $2,000 Loudon County, (MBIA),
5.25%, 1/1/30 $ 1,795,220
Aaa AAA 3,000 City of Richmond,
(FGIC), 5.00%, 1/15/21 2,642,580
-----------
$ 4,437,800
-----------
INSURED HOSPITALS - 8.6%
Aaa AAA $1,665 Arlington County, IDA,
The Arlington Hospital,
(AMBAC), 5.00% , 9/1/21 $ 1,433,532
Aaa AAA 5,000 Augusta County, IDA,
Augusta Hospital
Corporation, (AMBAC),
5.125%, 9/1/21 4,514,850
Aaa AAA 2,500 Chesapeake Hospital
Authority, Chesapeake
General Hospital,
(MBIA), 5.25%, 7/1/18 2,278,950
Aaa AAA 1,500 Henrico County, Bon
Secour Health Systems,
(MBIA), 6.25%, 8/15/20 1,578,690
Aaa AAA 1,000 City of Roanoke, IDA,
Franklin Memorial
Hospital and St. Albans
Psychiatric Hospital,
(MBIA), 5.25%, 7/1/25 901,440
Aaa AAA 2,250 City of VA Beach, IDA,
Virginia Beach Memorial
Hospital, (AMBAC),
5.125%, 2/15/18 2,029,185
Aaa AAA 2,000 City of Winchester, IDA,
Winchester Medical
Center, (AMBAC),
Variable,
1/21/14 (1) 2,169,600
-----------
$ 14,906,247
-----------
</TABLE>
79
<PAGE> 80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED TRANSPORTATION - 5.8%
Aaa AAA $6,500 Metropolitan Washington
Airports Authority,
(MBIA), (AMT), 5.75%,
10/1/20 $ 6,206,590
Aaa AAA 3,000 Northern Virginia
Transportation District
Commission, (FGIC),
5.25%, 7/1/10 2,852,520
Aaa AAA 1,000 Richmond Metropolitan
Authority Expressway,
(FGIC), 6.375%, 7/15/16 1,040,270
-----------
$ 10,099,380
-----------
INSURED UTILITIES - 0.5%
Aaa AAA $ 900 Commonwealth of Puerto
Rico, Telephone
Authority, (MBIA),
Variable, 1/16/15 (1) $ 813,600
-----------
INSURED WATER & SEWER - 4.4%
Aaa AAA $2,000 Loudon County Sanitation
Authority, (MBIA),
5.25%, 1/1/25 $ 1,819,380
Aaa AAA 1,000 Norfolk County Water and
Sewer Authority,
(AMBAC), 5.25%, 11/1/13 941,680
Aaa AAA 1,000 Roanoke County Water and
Sewer Authority, (FGIC),
5.00%, 7/1/21 881,030
Aaa AAA 1,750 Upper Occoquan Sewage
Authority, (FGIC),
5.00%, 7/1/15 1,581,475
Aaa AAA 2,700 Upper Occoquan Sewage
Authority, (MBIA),
5.15%, 7/1/20 2,474,685
-----------
$ 7,698,250
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 7.7%
Aa AA $2,250 Fairfax County Economic
Development Authority,
Lease, Government Center
Properties, 5.25%,
11/15/18 $ 2,046,825
Aa AA 2,250 Fairfax County Economic
Development Authority,
Lease, Government Center
Properties, 5.50%,
5/15/14 2,163,690
A NR 3,000 Rockingham and
Harrisonburg Counties,
Harrisonburg
Redevelopment and
Housing Authority,
Lease, 6.50%, 9/1/14 3,080,670
Aa AA 2,000 Henrico County, IDA,
Lease, 7.00%, 8/1/13 2,230,520
Aa AA 2,250 Henrico County, IDA,
Lease, 7.125%, 8/1/21 2,503,620
NR NR 1,250 King George County,
Lease, 7.00%, 12/15/12 1,284,525
-----------
$ 13,309,850
-----------
LIFE CARE - 1.2%
NR NR $2,000 Loudon County, IDA,
Falcons Landing, 8.75%,
11/1/24 $ 2,029,420
-----------
NURSING HOMES - 0.2%
NR NR $ 325 Covington-Allegheny
County, IDA, Beverly
Enterprises, 9.375%,
9/1/01 $ 363,243
-----------
SOLID WASTE - 1.8%
A1 A+ $ 915 Fairfax County Economic
Development Authority,
Ogden Martin Systems of
Fairfax Incorporated,
(AMT), 7.75%, 2/1/11 $ 986,754
Baa1 A- 2,250 Southeastern Public
Service Authority, Solid
Waste Systems, (AMT),
6.00%, 7/1/13 2,196,270
-----------
$ 3,183,024
-----------
SPECIAL TAX REVENUE - 4.5%
Baa1 A $2,200 Commonwealth of Puerto
Rico Highway &
Transportation
Authority, 5.25%, 7/1/20 $ 1,994,630
Baa1 A 500 Commonwealth of Puerto
Rico Highway &
Transportation
Authority, 5.00%, 7/1/22 435,320
Baa1 A 2,100 Commonwealth of Puerto
Rico Highway &
Transportation
Authority, 5.00%, 7/1/36 1,788,612
Aa AA 1,000 VA State Transportation
Board Revenue, Route 28,
Variable, 4/1/18 (1) 1,067,430
Aa AA 2,800 VA State Transportation
Board Revenue, US Route
28, 5.25%, 5/15/19 2,557,380
-----------
$ 7,843,372
-----------
TRANSPORTATION - 0.2%
NR BBB $ 400 Charlotesville-Albermarle
VA Airport Authority,
(AMT), 6.125%, 12/1/13 $ 384,932
-----------
</TABLE>
80
<PAGE> 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ----------------- PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES - 1.1%
Baa1 BBB+ $3,000 Commonwealth of Puerto
Rico Electric Authority
Power, 0%, 7/1/17 $ 832,860
NR NR 1,000 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 1,052,760
-----------
$ 1,885,620
-----------
WATER & SEWER REVENUE - 5.6%
Aa AA- $2,000 Fairfax County, VA Water
Authority, 5.75%, 4/1/29 $ 1,914,940
Aa AA- 1,000 Fairfax County, VA Water
Authority, Variable,
4/1/29 (1) 922,180
Aa AA- 4,095 Fairfax County, VA Water
Authority, 5.00%, 4/1/16 3,679,071
NR AA 1,655 VA Resource Authority,
Hopewell Waste Water,
(AMT), 6.00%, 10/1/25 1,645,881
NR AA 1,880 VA Resource Authority,
Campbell Utilities,
5.125%, 10/1/19 1,669,402
-----------
$ 9,831,474
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$166,591,098) $174,179,152
===========
</TABLE>
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Virginia
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at August 31, 1996, 21.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 1.6% to 10.3% of total investments.
See notes to financial statements
81
<PAGE> 82
- --------------------------------------------------------------------------------
Municipals Portfolios
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA ARKANSAS GEORGIA KENTUCKY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $103,574,803 $72,738,104 $105,076,413 $126,102,002
Unrealized appreciation 2,698,089 968,243 3,041,721 3,332,570
------------ ----------- ------------ ------------
Total investments, at value (Note 1A) $106,272,892 $73,706,347 $108,118,134 $129,434,572
Cash 428,829 201 496 1,336,192
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 49,688 33,125 75,938 29,250
Receivable for investments sold -- -- 857,431 --
Interest receivable 1,830,350 1,113,212 1,564,546 2,224,354
Deferred organization expenses (Note 1D) 2,185 3,669 3,312 1,832
------------ ----------- ------------ ------------
Total assets $108,583,944 $74,856,554 $110,619,857 $133,026,200
------------ ----------- ------------ ------------
LIABILITIES:
Demand note payable (Note 5) $ -- $ 744,000 $ 200,000 $ --
Payable for when-issued securities (Note 1G) -- -- 1,435,337 --
Payable to affiliates --
Trustees' fees (Note 2) 1,459 1,129 1,459 1,460
Accrued expenses 38,935 8,208 8,766 7,287
------------ ----------- ------------ ------------
Total liabilities $ 40,394 $ 753,337 $ 1,645,562 $ 8,747
------------ ----------- ------------ ------------
NET ASSETS applicable to investors' interest in
Portfolio $108,543,550 $74,103,217 $108,974,295 $133,017,453
============== ============ ============== ==============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $105,743,761 $73,067,176 $105,778,342 $129,717,960
Unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 2,799,789 1,036,041 3,195,953 3,299,493
------------ ----------- ------------ ------------
Total $108,543,550 $74,103,217 $108,974,295 $133,017,453
============== ============ ============== ==============
</TABLE>
See notes to financial statements
82
<PAGE> 83
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $34,274,641 $107,316,217 $83,659,501 $173,941,735
Unrealized appreciation 503,777 1,237,423 2,120,905 7,901,804
----------- ------------ ----------- ------------
Total investments, at value (Note 1A) $34,778,418 $108,553,640 $85,780,406 $181,843,539
Cash 206,137 514,620 159,141 2,315,367
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 17,719 49,688 63,281 67,500
Receivable for investments sold 30,000 -- -- --
Interest receivable 617,777 1,485,090 1,145,605 2,831,296
Deferred organization expenses (Note 1D) 3,340 2,342 1,954 4,948
----------- ------------ ----------- ------------
Total assets $35,653,391 $110,605,380 $87,150,387 $187,062,650
----------- ------------ ----------- ------------
LIABILITIES:
Payable for investments purchased $ 601,734 $ -- $ -- $ --
Payable for when-issued securities (Note 1G) -- -- 1,981,688 --
Payable to affiliates --
Trustees' fees (Note 2) 273 1,460 1,121 1,899
Accrued expenses 2,713 15,575 5,215 16,366
----------- ------------ ----------- ------------
Total liabilities $ 604,720 $ 17,035 $ 1,988,024 $ 18,265
----------- ------------ ----------- ------------
NET ASSETS applicable to investors' interest in
Portfolio $35,048,671 $110,588,345 $85,162,363 $187,044,385
=========== ============ =========== ============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $34,512,856 $109,249,224 $82,912,932 $179,020,532
Unrealized appreciation of investments and
financial futures contracts (computed on
the basis of
identified cost) 535,815 1,339,121 2,249,431 8,023,853
----------- ------------ ----------- ------------
Total $35,048,671 $110,588,345 $85,162,363 $187,044,385
=========== ============ =========== ============
</TABLE>
See notes to financial statements
83
<PAGE> 84
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $122,520,158 $ 54,923,381 $55,475,532 $166,591,098
Unrealized appreciation 3,136,592 1,875,918 778,304 7,588,054
----------- ------------ ----------- ------------
Total investments, at value (Note 1A) $125,656,750 $ 56,799,299 $56,253,836 $174,179,152
Cash 2,285,772 547 1,082,279 393,973
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 30,063 -- 37,969 39,813
Receivable for investments sold 25,280 1,855,388 -- 1,000,918
Interest receivable 1,766,214 834,686 881,135 2,992,467
Deferred organization expenses (Note 1D) 2,940 3,532 3,442 4,020
----------- ------------ ----------- ------------
Total assets $129,767,019 $ 59,493,452 $58,258,661 $178,610,343
----------- ------------ ----------- ------------
LIABILITIES:
Demand note payable (Note 5) $ -- $ 1,167,000 $ -- $ --
Payable for investments purchased -- -- 2,187,897 959,222
Payable for when-issued securities (Note 1G) -- -- -- --
Payable to affiliates --
Trustees' fees (Note 2) 1,449 1,129 1,121 1,899
Accrued expenses 6,915 7,176 4,290 4,901
----------- ------------ ----------- ------------
Total liabilities $ 8,364 $ 1,175,305 $ 2,193,308 $ 966,022
----------- ------------ ----------- ------------
NET ASSETS applicable to investors' interest in
Portfolio $129,758,655 $ 58,318,147 $56,065,353 $177,644,321
=========== ============ =========== ============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $126,656,060 $ 56,442,229 $55,209,934 $170,101,289
Unrealized appreciation of investments and
financial futures contracts (computed on
the basis of
identified cost) 3,102,595 1,875,918 855,419 7,543,032
----------- ------------ ----------- ------------
Total $129,758,655 $ 58,318,147 $56,065,353 $177,644,321
=========== ============ =========== ============
</TABLE>
See notes to financial statements
84
<PAGE> 85
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA ARKANSAS GEORGIA KENTUCKY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (Note 1B) $ 6,851,010 $ 4,621,168 $ 7,145,924 $ 8,382,372
----------- ----------- ----------- -----------
Expenses --
Investment adviser fee (Note 2) $ 455,711 $ 280,071 $ 473,056 $ 577,479
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,405 7,036 8,405 8,406
Custodian fee (Note 1J) 53,149 43,150 67,566 74,670
Legal and accounting services 26,282 23,682 26,265 26,282
Amortization of organization expenses (Note 1D) 1,574 1,508 2,199 1,325
Miscellaneous 19,385 23,642 11,289 16,549
----------- ----------- ----------- -----------
Total expenses $ 564,506 $ 379,089 $ 588,780 $ 704,711
Deduct reduction of custodian fee (Note 1J) 46,364 13,624 56,585 43,044
----------- ----------- ----------- -----------
Net expenses $ 518,142 $ 365,465 $ 532,195 $ 661,667
----------- ----------- ----------- -----------
Net investment income $ 6,332,868 $ 4,255,703 $ 6,613,729 $ 7,720,705
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,661,053 $ 409,550 $ 857,232 $ (616,659)
Financial futures contracts (173,308) (123,307) (97,162) (601,899)
----------- ----------- ----------- -----------
Net realized gain (loss) on investments $ 1,487,745 $ 286,243 $ 760,070 $(1,218,558)
----------- ----------- ----------- -----------
Change in unrealized appreciation (depreciation) --
Investments $(1,171,352) $ (576,414) $ (387,654) $ 1,324,853
Financial futures contracts 164,734 112,821 154,232 45,714
----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) $(1,006,618) $ (463,593) $ (233,422) $ 1,370,567
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments $ 481,127 $ (177,350) $ 526,648 $ 152,009
----------- ----------- ----------- -----------
Net increase in net assets from operations $ 6,813,995 $ 4,078,353 $ 7,140,377 $ 7,872,714
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
85
<PAGE> 86
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (Note 1B) $ 2,163,506 $ 6,871,539 $ 5,435,654 $ 11,592,850
----------- ----------- ----------- -----------
Expenses --
Investment adviser fee (Note 2) $ 81,468 $ 454,842 $ 339,243 $ 832,564
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 2,044 8,406 5,318 11,016
Custodian fee (Note 1J) 24,746 67,183 49,585 97,155
Legal and accounting services 23,582 23,482 24,182 30,882
Bond pricing 6,326 9,185 -- --
Amortization of organization expenses (Note
1D) 1,357 1,523 1,409 3,375
Miscellaneous 6,517 22,009 21,537 35,447
----------- ----------- ----------- -----------
Total expenses $ 146,040 $ 586,630 $ 441,274 $ 1,010,439
----------- ----------- ----------- -----------
Deduct --
Reduction of investment adviser fee (Note 2) $ 40,000 $ -- $ -- $ --
Reduction of custodian fee (Note 1J) 23,317 30,707 13,158 80,694
----------- ----------- ----------- -----------
Total $ 63,317 $ 30,707 $ 13,158 $ 80,694
----------- ----------- ----------- -----------
Net expenses $ 82,723 $ 555,923 $ 428,116 $ 929,745
----------- ----------- ----------- -----------
Net investment income $ 2,080,783 $ 6,315,616 $ 5,007,538 $ 10,663,105
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost
basis) $ (101,512) $ 1,707,109 $ 1,192,422 $ (206,784)
Financial futures contracts (251,973) (173,349) (90,509) 68,035
----------- ----------- ----------- -----------
Net realized gain (loss) on investments $ (353,485) $ 1,533,760 $ 1,101,913 $ (138,749)
----------- ----------- ----------- -----------
Change in unrealized appreciation
(depreciation) --
Investments $ 242,866 $ (735,475) $(1,154,555) $ 620,646
Financial futures contracts 47,289 164,731 128,526 122,050
----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) $ 290,155 $ (570,744) $(1,026,029) $ 742,696
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments $ (63,330) $ 963,016 $ 75,884 $ 603,947
----------- ----------- ----------- -----------
Net increase in net assets from
operations $ 2,017,453 $ 7,278,632 $ 5,083,422 $ 11,267,052
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
86
<PAGE> 87
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (Note 1B) $ 8,221,218 $ 3,785,352 $ 3,443,711 $11,381,552
----------- -------------- ----------- -----------
Expenses --
Investment adviser fee (Note 2) $ 574,189 $ 201,026 $ 181,502 $ 811,731
Compensation of Trustees not members of the
Investment Adviser's organization (Note
2) 9,090 6,447 6,439 11,016
Custodian fee (Note 1J) 75,912 34,304 35,778 94,070
Interest expense (Note 5) -- 52,147 -- --
Legal and accounting services 26,182 23,682 23,582 30,173
Amortization of organization expenses (Note
1D) 2,097 1,446 2,365 2,771
Miscellaneous 17,748 9,651 10,122 18,362
----------- -------------- ----------- -----------
Total expenses $ 705,218 $ 328,703 $ 259,788 $ 968,123
Deduct reduction of custodian fee (Note 1J) 43,303 17,420 13,320 70,033
----------- -------------- ----------- -----------
Net expenses $ 661,915 $ 311,283 $ 246,468 $ 898,090
----------- -------------- ----------- -----------
Net investment income $ 7,559,303 $ 3,474,069 $ 3,197,243 $10,483,462
----------- -------------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost
basis) $ (429,494) $ 767,038 $ 212,502 $ 613,287
Financial futures contracts (539,638) (107,652) (171,136) (434,540)
----------- -------------- ----------- -----------
Net realized gain (loss) on investments $ (969,132) $ 659,386 $ 41,366 $ 178,747
----------- -------------- ----------- -----------
Change in unrealized appreciation
(depreciation) --
Investments $ 487,222 $ (468,193) $ 249,315 $ 193,892
Financial futures contracts 4,861 -- 111,655 (45,022)
----------- -------------- ----------- -----------
Net unrealized appreciation
(depreciation) $ 492,083 $ (468,193) $ 360,970 $ 148,870
----------- -------------- ----------- -----------
Net realized and unrealized gain
(loss) on investments $ (477,049) $ 191,193 $ 402,336 $ 327,617
----------- -------------- ----------- -----------
Net increase in net assets from
operations $ 7,082,254 $ 3,665,262 $ 3,599,579 $10,811,079
============ ================== ============ ============
</TABLE>
See notes to financial statements
87
<PAGE> 88
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA ARKANSAS GEORGIA KENTUCKY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 6,332,868 $ 4,255,703 $ 6,613,729 $ 7,720,705
Net realized gain (loss) on investment
transactions 1,487,745 286,243 760,070 (1,218,558)
Change in unrealized appreciation
(depreciation)
of investments (1,006,618) (463,593) (233,422) 1,370,567
------------ ----------- ------------ ------------
Net increase in net assets from
operations $ 6,813,995 $ 4,078,353 $ 7,140,377 $ 7,872,714
------------ ----------- ------------ ------------
Capital transactions --
Contributions $ 5,435,768 $ 3,573,437 $ 4,580,164 $ 6,532,846
Withdrawals (22,192,266) (15,083,575) (25,694,913) (26,656,733)
------------ ----------- ------------ ------------
Decrease in net assets resulting from
capital transactions $(16,756,498) $(11,510,138) $(21,114,749) $(20,123,887)
------------ ----------- ------------ ------------
Net decrease in net assets $ (9,942,503) $ (7,431,785) $(13,974,372) $(12,251,173)
NET ASSETS:
At beginning of year 118,486,053 81,535,002 122,948,667 145,268,626
------------ ----------- ------------ ------------
At end of year $108,543,550 $ 74,103,217 $108,974,295 $133,017,453
============ =========== ============ ============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 2,080,783 $ 6,315,616 $ 5,007,538 $ 10,663,105
Net realized gain (loss) on investment
transactions (353,485) 1,533,760 1,101,913 (138,749)
Change in unrealized appreciation
(depreciation)
of investments 290,155 (570,744) (1,026,029) 742,696
----------- ------------ ----------- ------------
Net increase in net assets from
operations $ 2,017,453 $ 7,278,632 $ 5,083,422 $ 11,267,052
----------- ------------ ----------- ------------
Capital transactions --
Contributions $ 4,634,958 $ 9,198,950 $ 4,159,884 $ 19,433,725
Withdrawals (5,912,419) (20,893,413) (17,243,046) (38,835,116)
----------- ------------ ----------- ------------
Decrease in net assets resulting from
capital transactions $(1,277,461) $(11,694,463) $(13,083,162) $(19,401,391)
----------- ------------ ----------- ------------
Net increase (decrease) in net
assets $ 739,992 $ (4,415,831) $ (7,999,740) $ (8,134,339)
NET ASSETS:
At beginning of year 34,308,679 115,004,176 93,162,103 195,178,724
----------- ------------ ----------- ------------
At end of year $35,048,671 $110,588,345 $ 85,162,363 $187,044,385
=========== ============ =========== ============
</TABLE>
See notes to financial statements
88
<PAGE> 89
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 7,559,303 $ 3,474,069 $ 3,197,243 $ 10,483,462
Net realized gain (loss) on investment
transactions (969,132) 659,386 41,366 178,747
Change in unrealized appreciation
(depreciation)
of investments 492,083 (468,193) 360,970 148,870
------------ ----------- ----------- ------------
Net increase in net assets from
operations $ 7,082,254 $ 3,665,262 $ 3,599,579 $ 10,811,079
------------ ----------- ----------- ------------
Capital transactions --
Contributions $ 5,697,262 $ 5,386,887 $ 4,078,787 $ 9,068,306
Withdrawals (29,411,782) (12,145,670) (10,286,316) (33,982,986)
------------ ----------- ----------- ------------
Decrease in net assets resulting from
capital transactions $(23,714,520) $ (6,758,783) $(6,207,529) $(24,914,680)
------------ ----------- ----------- ------------
Net decrease in net assets $(16,632,266) $ (3,093,521) $(2,607,950) $(14,103,601)
NET ASSETS:
At beginning of year 146,390,921 61,411,668 58,673,303 191,747,922
------------ ----------- ----------- ------------
At end of year $129,758,655 $ 58,318,147 $56,065,353 $177,644,321
============ =========== =========== ============
</TABLE>
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA ARKANSAS GEORGIA KENTUCKY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 6,676,427 $ 4,614,351 $ 7,291,242 $ 8,179,915
Net realized loss on investment
transactions (3,373,448) (2,517,820) (7,312,379) (2,715,132)
Change in unrealized appreciation of
investments 5,884,230 3,464,139 6,679,653 4,942,400
------------ ------------ ------------ ------------
Net increase in net assets from
operations $ 9,187,209 $ 5,560,670 $ 6,658,516 $ 10,407,183
------------ ------------ ------------ ------------
Capital transactions --
Contributions $ 15,271,028 $ 7,773,910 $ 12,224,959 $ 13,579,954
Withdrawals (23,135,575) (14,716,313) (33,658,605) (23,928,447)
------------ ------------ ------------ ------------
Decrease in net assets resulting from
capital transactions $ (7,864,547) $ (6,942,403) $(21,433,646) $(10,348,493)
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets $ 1,322,662 $ (1,381,733) $(14,775,130) $ 58,690
NET ASSETS:
At beginning of year 117,163,391 82,916,735 137,723,797 145,209,936
------------ ------------ ------------ ------------
At end of year $118,486,053 $ 81,535,002 $122,948,667 $145,268,626
============== ============= ============== ==============
</TABLE>
See notes to financial statements
89
<PAGE> 90
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,975,712 $ 6,659,328 $ 5,326,719 $ 11,250,399
Net realized loss on investment
transactions (1,669,621) (3,315,017) (3,038,940) (9,105,062)
Change in unrealized appreciation of
investments 1,664,246 4,913,566 5,471,264 9,060,016
----------- ------------ ----------- --------------
Net increase in net assets from
operations $ 1,970,337 $ 8,257,877 $ 7,759,043 $ 11,205,353
----------- ------------ ----------- --------------
Capital transactions --
Contributions $ 6,817,148 $ 14,770,279 $ 8,450,749 $ 18,834,488
Withdrawals (5,902,141) (25,879,697) (18,215,122) (34,633,470)
----------- ------------ ----------- --------------
Increase (decrease) in net assets
resulting from
capital transactions $ 915,007 $(11,109,418) $(9,764,373) $(15,798,982)
----------- ------------ ----------- --------------
Total increase (decrease) in net
assets $ 2,885,344 $ (2,851,541) $(2,005,330) $ (4,593,629)
NET ASSETS:
At beginning of year 31,423,335 117,855,717 95,167,433 199,772,353
----------- ------------ ----------- --------------
At end of year $34,308,679 $115,004,176 $93,162,103 $195,178,724
============ ============== ============ ==================
</TABLE>
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 8,186,774 $ 3,526,297 $ 3,284,148 $ 11,081,732
Net realized loss on investment
transactions (4,370,692) (4,027,763) (1,911,797) (7,610,652)
Change in unrealized appreciation of
investments 7,371,961 4,266,658 2,627,149 10,279,680
------------ -------------- ----------- ------------
Net increase in net assets from
operations $ 11,188,043 $ 3,765,192 $ 3,999,500 $ 13,750,760
------------ -------------- ----------- ------------
Capital transactions --
Contributions $ 12,298,876 $ 9,608,721 $ 7,946,656 $ 24,173,920
Withdrawals (30,215,219) (14,226,934) (9,768,536) (40,695,946)
------------ -------------- ----------- ------------
Decrease in net assets resulting from
capital transactions $(17,916,343) $ (4,618,213) $(1,821,880) $(16,522,026)
------------ -------------- ----------- ------------
Net increase (decrease) in net
assets $ (6,728,300) $ (853,021) $ 2,177,620 $ (2,771,266)
NET ASSETS:
At beginning of year 153,119,221 62,264,689 56,495,683 194,519,188
------------ -------------- ----------- ------------
At end of year $146,390,921 $ 61,411,668 $58,673,303 $191,747,922
============== ================= ============ ==============
</TABLE>
See notes to financial statements
90
<PAGE> 91
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALABAMA PORTFOLIO ARKANSAS PORTFOLIO
-------------------------------------------------- ---------------------------
YEAR ENDED AUGUST 31, YEAR ENDED YEAR ENDED AUGUST 31,
------------------------------ ----------------- ---------------------------
1996 1995 1994* SEPT. 30, 1993** 1996 1995 1994***
-------- -------- -------- ----------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a percentage of average
daily net assets)++:
Net expenses (1) 0.49% 0.47% 0.44%+ 0.25%+ 0.48% 0.46% 0.24%+
Net expenses after custodian
fee reduction 0.45% -- -- -- 0.46% -- --
Net investment income 5.50% 5.77% 5.37%+ 5.52%+ 5.40% 5.69% 5.60%+
Portfolio Turnover 52% 51% 26% 10% 11% 23% 16%
NET ASSETS, end of year
(000 omitted) $108,544 $118,486 $117,163 $83,628 $74,103 $81,535 $82,917
++The operating expenses of the Portfolios may reflect a reduction of the investment adviser fee and/or an allocation of expenses
to the Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
RATIOS (As a percentage of average daily net assets):
Expenses (1) 0.35%+ 0.43%+
Net investment income 5.42%+ 5.41%+
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GEORGIA PORTFOLIO KENTUCKY PORTFOLIO
-------------------------------------------------- --------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED YEAR ENDED AUGUST 31, YEAR ENDED
------------------------------ ----------------- ------------------------------ -----------------
1996 1995 1994* SEPT. 30, 1993** 1996 1995 1994* SEPT. 30,1993**
-------- -------- -------- ----------------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a
percentage of
average daily net
assets):
Net expenses (1) 0.50% 0.46% 0.44%+ 0.40%+ 0.53% 0.49% 0.46%+ 0.40%+
Net expenses after
custodian
fee reduction 0.45% -- -- -- 0.50% -- -- --
Net investment
income 5.59% 5.73% 5.37%+ 5.37%+ 5.49% 5.75% 5.39%+ 5.40%+
Portfolio Turnover 21% 48% 45% 35% 28% 30% 21% 11%
NET ASSETS, end of
year
(000 omitted) $108,974 $122,949 $137,724 $ 119,311 $133,017 $145,269 $145,210 $ 117,936
</TABLE>
(1) The expense ratios for the year ended August 31, 1996 have been adjusted to
reflect a change in reporting requirements. The new reporting guidelines
require each 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 August 31, 1995 have not been
adjusted to reflect this change.
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
*** For the seven months ended August 31, 1994.
See notes to financial statements
91
<PAGE> 92
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOUISIANA PORTFOLIO MARYLAND PORTFOLIO
------------------------------------ ------------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31, YEAR ENDED
------------------------------------ ----------------------------------------- ----------------
1996 1995 1994*** 1996 1995 1994* SEPT. 30, 1993**
---------- ---------- ---------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a percentage of
average daily net
assets)++:
Net expenses (1) 0.30% 0.22% 0.14%+ 0.51% 0.47% 0.44%+ 0.36%+
Net expenses after
custodian fee reduction 0.23% -- -- 0.48% -- -- --
Net investment income 5.90% 6.06% 5.86%+ 5.50% 5.79% 5.44%+ 5.41%+
Portfolio Turnover 99% 46% 21% 33% 30% 41% 34%
NET ASSETS, end of year
(000 omitted) $ 35,049 $ 34,309 $ 31,423 $ 110,588 $ 115,004 $ 117,856 $ 94,213
</TABLE>
++The operating expenses of the Portfolios may reflect a reduction of the
investment adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such actions not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C>
RATIOS (As a percentage of
average daily net assets):
Expenses (1) 0.41% 0.33% 0.33%+ 0.38%+
Expenses after custodian
fee reduction 0.35% -- -- --
Net investment income 5.79% 5.95% 5.67%+ 5.39%+
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO
------------------------------------------------ ----------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED YEAR ENDED AUGUST 31, YEAR ENDED
------------------------- ---------------- ----------------------- ----------------
1996 1995 1994* SEPT. 30, 1993** 1996 1995 1994* SEPT. 30, 1993**
---- ---- ----- ---------------- ---- ---- ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a percentage of
average daily net
assets)++:
Net expenses (1) 0.49% 0.48% 0.45%+ 0.40%+ 0.52% 0.48% 0.46%+ 0.43%+
Net expenses after
custodian fee reduction 0.47% -- -- -- 0.48% -- -- --
Net investment income 5.52% 5.76% 5.36%+ 5.36%+ 5.51% 5.78% 5.40%+ 5.43%+
Portfolio Turnover 36% 24% 28% 6% 54% 33% 37% 21%
NET ASSETS, end of year
(000 omitted) $ 85,162 $ 93,162 $ 95,167 $75,273 $187,044 $ 195,179 $199,772 $172,534
</TABLE>
(1) The expense ratios for the year ended August 31, 1996 have been adjusted to
reflect a change in reporting requirements. The new reporting guidelines
require each 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 August 31, 1995 have not been
adjusted to reflect this change.
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
*** For the seven months ended August 31, 1994.
See notes to financial statements
92
<PAGE> 93
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO
------------------------------------------------------- -----------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED YEAR ENDED AUGUST 31,
------------------------------------ ---------------- -----------------------------------------
1996 1995 1994* SEPT. 30, 1993** 1996 1995 1994***
---------- ---------- ---------- ---------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a percentage of
average daily net assets):
Net expenses (1) 0.50% 0.50% 0.46%+ 0.43%+ 0.53% 0.44% 0.37%+
Net expenses after
custodian fee reduction 0.47% -- -- -- 0.51% -- --
Net investment income 5.37% 5.60% 5.26%+ 5.30%+ 5.65% 5.81% 5.47%+
Portfolio Turnover 28% 22% 15% 32% 36% 75% 23%
NET ASSETS, end of year
(000 omitted) $129,759 $146,391 $153,119 $127,497 $ 58,318 $61,412 $ 62,265
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO
------------------------------------------------- ----------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED YEAR ENDED AUGUST 31, YEAR ENDED
--------------------------- ----------------- -------------------------- ----------------
1996 1995 1994* SEPT. 30, 1993** 1996 1995 1994* SEPT. 30, 1993**
---- ---- ----- ----------------- ---- ---- ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS (As a percentage of
average daily net
assets)++:
Net expenses (1) 0.45% 0.41% 0.36%+ 0.08%+ 0.51% 0.48% 0.46%+ 0.43%+
Net expenses after
custodian fee reduction 0.43% -- -- -- 0.48% -- --
Net investment income 5.52% 5.81% 5.49%+ 5.60%+ 5.55% 5.81% 5.49%+ 5.49%+
Portfolio Turnover 39% 20% 10% 69% 30% 38% 48% 29%
NET ASSETS, end of year
(000 omitted) $56,065 $58,673 $56,496 $39,266 $177,644 $191,748 $194,519 $174,260
++The operating expenses of the Tennessee Portfolio reflect a reduction of the investment adviser fee and/or an allocation of
expenses to the Investment Adviser. Had such actions not been taken, the ratios would have been as follows:
RATIOS (As a percentage of average daily net assets):
Expenses(1) 0.31%+
Net investment income 5.37%+
</TABLE>
(1) The expense ratios for the year ended August 31, 1996 have been adjusted to
reflect a change in reporting requirements. The new reporting guidelines
require each 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 August 31, 1995 have not been
adjusted to reflect this change.
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
*** For the seven months ended August 31, 1994.
See notes to financial statements
93
<PAGE> 94
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Alabama Municipals Portfolio (Alabama Portfolio), Arkansas Municipals Portfolio
(Arkansas Portfolio), Georgia Municipals Portfolio (Georgia Portfolio), Kentucky
Municipals Portfolio (Kentucky Portfolio), Louisiana Municipals Portfolio
(Louisiana Portfolio), Maryland Municipals Portfolio (Maryland Portfolio),
Missouri Municipals Portfolio (Missouri Portfolio), North Carolina Municipals
Portfolio (North Carolina Portfolio), Oregon Municipals Portfolio (Oregon
Portfolio), South Carolina Municipals Portfolio (South Carolina Portfolio),
Tennessee Municipals Portfolio (Tennessee Portfolio) and Virginia Municipals
Portfolio (Virginia Portfolio), collectively the Portfolios, are registered
under the Investment Company Act of 1940 as non-diversified open-end management
investment companies which were organized as trusts under the laws of the State
of New York on May 1, 1992. The Declarations of Trust permit the Trustees to
issue interests in the Portfolios. The following is a summary of significant
accounting policies consistently followed by the Portfolios in the preparation
of their financial statements. 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 and options on
financial futures contracts listed on commodity exchanges are valued at closing
settlement prices. Over-the-counter options on financial futures are normally
valued at the mean between the latest bid and asked prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost, which
approximates value. Investments for which valuations or market quotations are
unavailable are valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
B. INCOME--Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C. INCOME TAXES--The Portfolios are treated as partnerships for Federal tax
purposes. No provision is made by the Portfolios for federal or state taxes on
any taxable income of the Portfolios because each investor in the Portfolios is
ultimately responsible for the payment of any taxes. Since some of the
Portfolios' investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolios, the Portfolios normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for their respective investors to
satisfy them. The Portfolios will allocate at least annually among their
respective investors each investor's distributive share of the Portfolios' net
taxable (if any) and tax-exempt investment income, net realized capital gains,
and any other items of income, gain, loss, deductions or credit. Interest income
received by the Portfolios on investments in municipal bonds, which is
excludable from gross income under the Internal Revenue Code, will retain its
status as income exempt from federal income tax when allocated to each
Portfolio's investors. The portion of such interest, if any, earned on private
activity bonds issued after August 7, 1986, may be considered a tax preference
item for investors.
D. DEFERRED ORGANIZATION EXPENSES--Costs incurred by a Portfolio in connection
with its organization are being amortized on the straight-line basis over five
years.
E. FINANCIAL FUTURES CONTRACTS--Upon the entering of a financial futures
contract, a Portfolio is required to deposit ("initial margin") either in cash
or securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by a Portfolio ("margin maintenance") each day, dependent on the daily
fluctuations in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by a Portfolio. A Portfolio's investment
in financial futures contracts is designed only to hedge against anticipated
future changes in interest rates. Should interest rates move unexpectedly, a
Portfolio may not achieve the anticipated benefits of the financial futures
contract and may realize a loss.
F. PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS--Upon the purchase of a put option
on a financial futures contract by a Portfolio, the premium paid is recorded as
an investment, the value of which is marked-to-market daily. When a purchased
option expires, a Portfolio will realize a loss in the amount of the cost of the
option. When a Portfolio enters into a closing sale transaction, the Portfolio
will realize a gain or loss depending on whether the sales proceeds from the
closing sale transaction are greater or less than the cost of the option. When a
Portfolio exercises a put option, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally paid.
G. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-- The Portfolios may engage in
when-issued or delayed delivery transactions. The Portfolios record when-issued
securities on trade date and maintain 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.
94
<PAGE> 95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Portfolios. Prior to November 10, 1995, IBT was an affiliate of BMR and
EVM. Pursuant to the respective custodian agreements, IBT receives a fee reduced
by credits which are determined based on the average daily cash balances each
Portfolio maintains with IBT. All significant credit balances used to reduce
each Portfolio's custodian fees 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 each Portfolio.
The fee is based upon a percentage of average daily net assets plus a percentage
of gross income (i.e., income other than gains from the sale of securities).
For the year ended August 31, 1996, each Portfolio paid advisory fees as
follows:
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT EFFECTIVE RATE*
------------------------------- -------- ---------------
<S> <C> <C>
Alabama $455,711 0.40%
Arkansas 280,071 0.36%
Georgia 473,056 0.40%
Kentucky 577,479 0.41%
Louisiana 81,468 0.23%
Maryland 454,842 0.40%
Missouri 339,243 0.37%
North Carolina 832,564 0.43%
Oregon 574,189 0.41%
South Carolina 201,026 0.33%
Tennessee 181,502 0.31%
Virginia 811,731 0.43%
</TABLE>
* Advisory fees paid as a percentage of average daily net assets.
To enhance the net income of the Louisiana Portfolio, BMR made a reduction of
its fee in the amount of $40,000 for the year ended August 31, 1996.
Except as to Trustees of the Portfolios who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolios out of such investment adviser fee.
Trustees of the Portfolios 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 August 31, 1996, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations.
95
<PAGE> 96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(3) INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities, put
option transactions and short-term obligations, for the year ended August 31,
1996, were as follows:
<TABLE>
<CAPTION>
ALABAMA PORTFOLIO ARKANSAS PORTFOLIO GEORGIA PORTFOLIO KENTUCKY PORTFOLIO
------------------- ------------------------ ------------------- ------------------------
<S> <C> <C> <C> <C>
Purchases $58,516,396 $ 8,677,659 $24,488,625 $ 38,215,680
Sales 69,323,963 15,815,010 36,265,111 52,724,448
</TABLE>
<TABLE>
<CAPTION>
LOUISIANA PORTFOLIO MARYLAND PORTFOLIO MISSOURI PORTFOLIO NORTH CAROLINA PORTFOLIO
------------------- ------------------------ ------------------- ------------------------
<S> <C> <C> <C> <C>
Purchases $35,368,398 $ 37,590,785 $32,502,501 $103,584,501
Sales 34,380,628 44,321,106 38,605,067 113,325,903
</TABLE>
<TABLE>
<CAPTION>
OREGON PORTFOLIO SOUTH CAROLINA PORTFOLIO TENNESSEE PORTFOLIO VIRGINIA PORTFOLIO
------------------- ------------------------ ------------------- ------------------------
<S> <C> <C> <C> <C>
Purchases $38,780,050 $ 22,348,475 $21,979,715 $ 54,834,409
Sales 59,102,501 28,749,687 23,829,135 68,236,868
</TABLE>
- --------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investments
owned by each Portfolio at August 31, 1996, as computed on a federal income tax
basis, are as follows:
<TABLE>
<CAPTION>
ALABAMA ARKANSAS GEORGIA KENTUCKY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Aggregate Cost $103,574,803 $ 72,738,104 $105,076,413 $126,102,002
------------ -------------- ------------ --------------
Gross unrealized
appreciation $ 3,446,091 $ 1,681,892 $ 3,659,100 $ 4,103,780
Gross unrealized
depreciation 748,002 713,649 617,379 771,210
------------ -------------- ------------ --------------
Net unrealized
appreciation $ 2,698,089 $ 968,243 $ 3,041,721 $ 3,332,570
============== ================= ============== ==================
</TABLE>
<TABLE>
<CAPTION>
LOUISIANA MARYLAND MISSOURI NORTH CAROLINA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Aggregate Cost $ 34,274,641 $107,316,217 $ 83,659,501 $173,941,735
------------ -------------- ------------ --------------
Gross unrealized
appreciation $ 770,992 $ 2,709,795 $ 3,057,213 $ 8,295,425
Gross unrealized
depreciation 267,215 1,472,372 936,308 393,621
------------ -------------- ------------ --------------
Net unrealized
appreciation $ 503,777 $ 1,237,423 $ 2,120,905 $ 7,901,804
============== ================= ============== ==================
</TABLE>
<TABLE>
<CAPTION>
OREGON SOUTH CAROLINA TENNESSEE VIRGINIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Aggregate Cost $122,520,158 $ 54,923,381 $ 55,475,532 $166,591,098
------------ -------------- ------------ --------------
Gross unrealized
appreciation $ 4,105,957 $ 2,085,490 $ 1,169,546 $ 7,996,957
Gross unrealized
depreciation 969,365 209,572 391,242 408,903
------------ -------------- ------------ --------------
Net unrealized
appreciation $ 3,136,592 $ 1,875,918 $ 778,304 $ 7,588,054
============== ================= ============== ==================
</TABLE>
96
<PAGE> 97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Portfolios participate with other Portfolios and Funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank. The line
of credit consists of a $20 million committed facility and a $100 million
discretionary facility. Each Portfolio may temporarily borrow up to 5% of its
total assets to satisfy redemption requests or settle transactions. 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. At August 31, 1996, the Arkansas Portfolio, Georgia Portfolio and
South Carolina Portfolio had a balance outstanding pursuant to this line of
credit of $744,000, $200,000 and $1,167,000, respectively. For the South
Carolina Portfolio, the average daily balance outstanding was $750,000, and the
average interest rate was 6.96%. For the South Carolina Portfolio, the maximum
borrowing during the year ended August 31, 1996 was $6,564,000. The Portfolios,
exclusive of the South Carolina Portfolio, did not have any significant
borrowings or allocated fees during the year ended August 31, 1996.
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolios regularly trade in financial instruments with off-balance sheet
risk in the normal course of their investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options and futures contracts and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment a Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at August 31, 1996 is
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
FUTURES CONTRACTS APPRECIATION
PORTFOLIO EXPIRATION DATE CONTRACTS POSITION (DEPRECIATION)
- ---------------- ----------------- ------------------------ -------- --------------
<S> <C> <C> <C> <C>
Alabama 9/96 30 U.S. Treasury Bonds Short $ 51,247
12/96 30 U.S. Treasury Bonds Short 50,453
--------------
$101,700
=================
Arkansas 9/96 20 U.S. Treasury Bonds Short $ 34,164
12/96 20 U.S. Treasury Bonds Short 33,634
--------------
$ 67,798
=================
Georgia 12/96 90 U.S. Treasury Bonds Short $154,232
Kentucky 9/96 36 U.S. Treasury Bonds Short $(33,078)
Louisiana 12/96 21 U.S. Treasury Bonds Short $ 32,038
Maryland 9/96 30 U.S. Treasury Bonds Short $ 51,245
12/96 30 U.S. Treasury Bonds Short 50,453
--------------
$101,698
=================
Missouri 12/96 75 U.S. Treasury Bonds Short $128,526
North Carolina 12/96 80 U.S. Treasury Bonds Short $122,049
Oregon 9/96 37 U.S. Treasury Bonds Short $(33,997)
Tennessee 12/96 45 U.S. Treasury Bonds Short $ 77,115
Virginia 9/96 49 U.S. Treasury Bonds Short $(45,022)
</TABLE>
At August 31, 1996, each Portfolio had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
97
<PAGE> 98
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF:
ALABAMA MUNICIPALS PORTFOLIO
ARKANSAS MUNICIPALS PORTFOLIO
GEORGIA MUNICIPALS PORTFOLIO
KENTUCKY MUNICIPALS PORTFOLIO
LOUISIANA MUNICIPALS PORTFOLIO
MARYLAND MUNICIPALS PORTFOLIO
MISSOURI MUNICIPALS PORTFOLIO
NORTH CAROLINA MUNICIPALS PORTFOLIO
OREGON MUNICIPALS PORTFOLIO
SOUTH CAROLINA MUNICIPALS PORTFOLIO
TENNESSEE MUNICIPALS PORTFOLIO
VIRGINIA MUNICIPALS PORTFOLIO
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Alabama Municipals Portfolio, Arkansas
Municipals Portfolio, Georgia Municipals Portfolio, Kentucky Municipals
Portfolio, Louisiana Municipals Portfolio, Maryland Municipals Portfolio,
Missouri Municipals Portfolio, North Carolina Municipals Portfolio, Oregon
Municipals Portfolio, South Carolina Municipals Portfolio, Tennessee Municipals
Portfolio and Virginia Municipals Portfolio as of August 31, 1996, the related
statements of operations for the year then ended, the statements of changes in
net assets for the years ended August 31, 1996 and 1995 and supplementary data
for each of the years in the three year period ended August 31, 1996, and for
the period from the start of business to September 30, 1993 for the Alabama
Municipals Portfolio, Georgia Municipals Portfolio, Kentucky Municipals
Portfolio, Maryland Municipals Portfolio, Missouri Municipals Portfolio, North
Carolina Municipals Portfolio, Tennessee Municipals Portfolio and Virginia
Municipals Portfolio. These financial statements and supplementary data are the
responsibility of the Trusts' management. Our responsibility is to express an
opinion on the 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 August
31, 1996, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other audit 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 Alabama Municipals
Portfolio, Arkansas Municipals Portfolio, Georgia Municipals Portfolio, Kentucky
Municipals Portfolio, Louisiana Municipals Portfolio, Maryland Municipals
Portfolio, Missouri Municipals Portfolio, North Carolina Municipals Portfolio,
Oregon Municipals Portfolio, South Carolina Municipals Portfolio, Tennessee
Municipals Portfolio, and Virginia Municipals Portfolio at August 31, 1996, the
results of their operations, the changes in their net assets and their
supplementary data for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
OCTOBER 1, 1996
98
<PAGE> 99
- --------------------------------------------------------------------------------
Investment Management
- --------------------------------------------------------------------------------
FUNDS
OFFICERS INDEPENDENT TRUSTEES
THOMAS J. FETTER DONALD R. DWIGHT
President President, Dwight Partners, Inc.
Chairman, Newspapers of New
England, Inc.
JAMES B. HAWKES
Vice President, Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
Investment Banking,
ROBERT B. MACINTOSH Harvard University Graduate
Vice President School of Business Administration
JAMES L. O'CONNOR NORTON H. REAMER
Treasurer President and Director, United
Asset
THOMAS OTIS Management Corporation
Secretary
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
- -------------------------------------------------------------------------------
PORTFOLIOS
OFFICERS INDEPENDENT TRUSTEES
THOMAS J. FETTER DONALD R. DWIGHT
President and Portfolio President, Dwight Partners, Inc.
Manager Chairman, Newspapers of New
of South Carolina England, Inc.
Municipal Portfolio
SAMUEL L. HAYES, III
JAMES B. HAWKES Jacob H. Schiff Professor of
Vice President, Trustee Investment
Banking, Harvard University
ROBERT B. MACINTOSH Graduate
Vice President and Portfolio School of Business Administration
Manager
of Louisiana and NORTON H. REAMER
North Carolina President and Director, United
Municipals Portfolios Asset
Management Corporation
TIMOTHY T. BROWSE
Vice President and Portfolio JOHN L. THORNDIKE
Manager of Director, Fiduciary Company
Alabama, Arkansas and Maryland Incorporated
Municipals Portfolios
JACK L. TREYNOR
CYNTHIA J. CLEMSON Investment Adviser and Consultant
Vice President and Portfolio
Manager of
Georgia, Missouri and Tennessee
Municipals Portfolios
DAVID C. REILLY
Vice President and Portfolio
Manager of
Kentucky, Oregon and Virginia
Municipals Portfolios
<PAGE> 100
- --------------------------------------------------------------------------------
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
(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 5123
Westborough, MA 01581-5123
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 Funds, including its distribution
plan, sales charges and expenses. Please read the prospectus carefully before
you invest or send money.
EATON VANCE MUNICIPALS TRUST
24 FEDERAL STREET
BOSTON, MA 02110 M-12CSRC-11/96
100
