<PAGE> 1
EATON VANCE MUNICIPALS TRUST
FOR THE FUNDS:
- EV TRADITIONAL ARIZONA MUNICIPALS FUND
- EV TRADITIONAL COLORADO MUNICIPALS FUND
- EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
- EV TRADITIONAL MICHIGAN MUNICIPALS FUND
- EV TRADITIONAL MINNESOTA MUNICIPALS FUND
- EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
- EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
- EV TRADITIONAL TEXAS MUNICIPALS FUND
[Graphic]
ANNUAL SHAREHOLDER REPORT
JULY 31, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
One-year results ............................................. 3
President's letter to shareholders ........................... 4
Management Reports:
EV Traditional Arizona Municipals Fund ............... 5
EV Traditional Colorado Municipals Fund .............. 6
EV Traditional Connecticut Municipals Fund ........... 7
EV Traditional Michigan Municipals Fund .............. 8
EV Traditional Minnesota Municipals Fund ............. 9
EV Traditional New Jersey Municipals Fund ............ 10
EV Traditional Pennsylvania Municipals Fund .......... 11
EV Traditional Texas Municipals Fund ................. 12
Financial Results .................................... 13
</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
INFORMATION ABOUT YOUR MUTUAL FUND INVESTMENT:
<TABLE>
<CAPTION>
RESULTS FOR THE YEAR Dividends
ENDED JULY 31, 1996 Total return paid by
(excl. sales Fund (during NAV per share Fund's distribution
charge) period) at 7/31/96 rate at 7/31/96
------------ ------------- ------------- -------------------
<S> <C> <C> <C> <C>
EV Traditional
Arizona Municipals Fund 6.3% $0.486 $9.61 5.36%
EV Traditional
Colorado Municipals Fund 6.9% $0.488 $9.37 5.50%
EV Traditional
Connecticut Municipals Fund 6.9% $0.573 $10.20 5.49%
EV Traditional
Michigan Municipals Fund 6.8% $0.468 $9.41 5.27%
EV Traditional
Minnesota Municipals Fund 6.4% $0.487 $9.40 5.48%
EV Traditional
New Jersey Municipals Fund 6.7% $0.590 $10.05 5.82%
EV Traditional
Pennsylvania Municipals Fund 7.3% $0.586 $10.11 5.79%
EV Traditional
Texas Municipals Fund 6.9% $0.489 $9.32 5.42%
</TABLE>
<TABLE>
<CAPTION>
If your combined The after-tax equivalent
Federal & state distribution rate you Tax
tax rate is... would need is... Information*
---------------- ------------------------ ------------
<S> <C> <C> <C>
EV Traditional
Arizona Municipals Fund 39.58% 8.82% 98.47%
EV Traditional
Colorado Municipals Fund 39.20% 9.00% 98.76%
EV Traditional
Connecticut Municipals Fund 38.88% 8.97% 99.52%
EV Traditional
Michigan Municipals Fund 40.58% 8.83% 98.78%
EV Traditional
Minnesota Municipals Fund 41.44% 9.31% 98.89%
EV Traditional
New Jersey Municipals Fund 40.08% 9.69% 99.37%
EV Traditional
Pennsylvania Municipals Fund 42.19% 10.00% 99.73%
EV Traditional
Texas Municipals Fund 36.00% 8.45% 99.61%
</TABLE>
* Percentages represent the amounts of the total dividends paid by the Funds,
from net investment income during the year that ended July 31, 1996, that have
been designated as tax-exempt interest dividends. Tax legislation eliminated the
exception to the market discount rules applicable to tax-exempt obligations.As a
result, certain tax-exempt obligations acquired by the Portfolio at market
discounts may generate a small amount of ordinary taxable income.
<PAGE> 4
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. 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 YIELD BONDS 85%
OF TREASURY YIELDS
5.89% 9.20%
30-YR. AAA GENERAL TAXABLE EQUIVALENT
OBLIGATION (GO) BONDS* YIELD OF INVESTMENT
FOR COUPLE IN 36%
TAX BRACKET
6.94%
30-YEAR TREASURY BONDS
Pricipal 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: Bloomburg, 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 the best way for many
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,
[Graphic] /s/Thomas J. Fetter
Thomas J. Fetter
President
September 10, 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
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.
4
<PAGE> 5
EV TRADITIONAL ARIZONA MUNICIPALS FUND
YOUR INVESTMENT AT WORK
SCOTTSDALE, AZ
INDUSTRIAL DEVELOPMENT AUTHORITY
SCOTTSDALE MEMORIAL HOSPITAL
Scottsdale Memorial Hospitals (SMH) was organized as a non-profit corporation in
1962. SMH operates two hospitals in the Scottsdale area, providing inpatient
acute care services for medical, surgical, pediatric, and obstetrics patients,
as well as critical care in its intensive care and coronary care units. The
proceeds of this bond issue were used to refinance earlier outstanding debt of
the Corporation. The insured bond, with a coupon of 6.125% and more than ten
years of call protection, is a good example of the Portfolio's recent efforts to
improve its call protection and focus on good yield opportunities.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................78
Average quality...............................Aa-
Investment grade.............................91.9%
Effective maturity...........................15.3 yrs.
Largest sectors:
Utilities.................................16.7%
Insured hospitals.........................13.3*
General obligations.......................11.4
Water & sewer..............................8.8
Insured general obligations................8.6*
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
- --------------------------------------------------------------------------------
THE STATE OF THE STATE: ARIZONA
Arizona's employment growth has accelerated in recent months, with
non-agricultural jobs increasing at an annual rate of 5%.That is somewhat ahead
of the pace set in 1995, when 80,000 new jobs were created. The surge in jobs
has created a relatively tight labor market, with unemployment hovering in the
4.7% range, well below the national rate. Job growth has been especially strong
in the government and services sectors, especially among companies that provide
services for business. Those sectors include high technology, computer software,
and research and laboratory testing. The largest industry concentration for new
jobs has been among companies that manufacture electronic components.
The Arizona economy has been boosted by last year's $432 million tax cut, which
resulted in an average income tax reduction of 13%. With a further $200 million
set aside for property tax cuts in 1996, Arizona is emphasizing a tax structure
that provides incentives for business and job growth. Not surprisingly, Arizona
was voted among the nation's ten favorite sites for business expansion in 1995,
according to a recent global business survey.
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EV TRADITIONAL ARIZONA
MUNICIPALS FUND (INCLUDING SALES CHARGE) AND THE LEHMAN BROTHERS MUNICIPAL BOND
INDEX FROM DECEMBER 31, 1993 THROUGH JULY 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
12/31/93 $ 10,000 $ 9,625 $ 10,000
1/31/94 $ 10,099 $ 9,721 $ 10,114
2/28/94 $ 9,898 $ 9,527 $ 9,852
3/31/94 $ 9,401 $ 9,048 $ 9,451
4/30/94 $ 9,442 $ 9,088 $ 9,531
5/31/94 $ 9,515 $ 9,158 $ 9,614
6/30/94 $ 9,442 $ 9,089 $ 9,558
7/31/94 $ 9,658 $ 9,296 $ 9,730
8/31/94 $ 9,680 $ 9,317 $ 9,764
9/30/94 $ 9,485 $ 9,129 $ 9,621
10/31/94 $ 9,196 $ 8,852 $ 9,450
11/30/94 $ 8,935 $ 8,600 $ 9,279
12/31/94 $ 9,224 $ 8,879 $ 9,483
1/31/95 $ 9,602 $ 9,242 $ 9,754
2/28/95 $ 9,968 $ 9,594 $ 10,038
3/31/95 $ 10,057 $ 9,680 $ 10,153
4/30/95 $ 10,066 $ 9,689 $ 10,165
5/31/95 $ 10,391 $ 10,002 $ 10,490
6/30/95 $ 10,216 $ 9,833 $ 10,398
7/31/95 $ 10,279 $ 9,894 $ 10,498
8/31/95 $ 10,394 $ 10,004 $ 10,630
9/30/95 $ 10,445 $ 10,054 $ 10,697
10/31/95 $ 10,628 $ 10,229 $ 10,852
11/30/95 $ 10,875 $ 10,468 $ 11,032
12/31/95 $ 11,014 $ 10,601 $ 11,138
1/31/96 $ 11,007 $ 10,662 $ 11,223
2/28/96 $ 10,957 $ 10,547 $ 11,147
3/31/96 $ 10,773 $ 10,369 $ 11,004
4/30/96 $ 10,719 $ 10,318 $ 10,973
5/31/96 $ 10,701 $ 10,300 $ 10,969
6/30/96 $ 10,816 $ 10,411 $ 11,088
7/31/96 $ 10,922 $ 10,513 $ 11,189
</TABLE>
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 12/13/93. +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: [Graphic]
"With issuance very low in the past year, we have been focusing on finding value
in the secondary market as well as in taking advantage of the strong
relationships we have built with brokers to find new issue opportunities. We
were particularly fortunate to purchase several attractive new-issue,
multi-family bonds and a strong non-rated issue in Mesa, each of which offered
an attractive yield and good bond structure. The lower issuance also gave us the
opportunity to take advantage of the ebb and flow of larger deal issuance,
selling some bonds at very attractive levels prior to a new issue's arrival, and
then purchasing bonds with good structure at cheaper levels."
Cynthia J. Clemson
<PAGE> 6
EV TRADITIONAL COLORADO MUNICIPALS FUND
YOUR INVESTMENT AT WORK
Colorado Health
Facilities Authority
Cleo Wallace Center
The Cleo Wallace Center is a nationally-recognized facility that specializes in
the treatment of emotionally disturbed youths and adolescents. Because of its
strong reputation, the Center has received referrals for patients from state
agencies across the nation. In addition to providing financing for a much needed
social service for the community, this non-rated bond has an attractive 7%
coupon and a maturity of 2015. This issue is an example of the research-driven
situations that are an Eaton Vance specialty and have characterized the
Portfolio's bond selection in recent months.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................42
Average quality................................A+
Investment grade.............................96.0%
Effective maturity...........................14.5 yrs.
Largest sectors:
Hospitals.................................16.8%
Housing ..................................15.4
Transportation............................14.1
Insured general obligations................9.9*
Industrial development revenue.............6.4
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: COLORADO
The Colorado economy continued to expand in 1996, but fell short of the fast
growth seen in the past two years. Layoffs by large employers, including AT&T
and Storage Technology, represented a setback for the state. Nonetheless,
employment growth, which netted 80,000 additional jobs in the past two years, is
expected to expand by 62,000 in 1996, according to the State Office of Planning
and Budget. Major growth industries in Colorado are in the service areas,
including tourism, gambling, entertainment and business services. Construction
has also been a driver of job growth, but may moderate as population growth
levels off.
Nonresidential construction was especially strong, boosted by increased activity
in government, education and hospital projects. Personal income growth for state
residents has been robust. Colorado remains one of only two western states that
has outpaced the nation in terms of personal income in recent years. Reflecting
Colorado's still-expansionary economy, revenue growth at the state level has
been strong, at 6.1% in fiscal year 1995-96, although down slightly from last
year's 7.3% pace.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional Colorado
Municipals Fund (Including Sales Charge) and the Lehman Brothers Municipal Bond
Index From December 31, 1993, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
12/31/93 $ 10,000 $ 9,626 $ 10,000
1/31/94 $ 10,104 $ 9,726 $ 10,114
2/28/94 $ 9,773 $ 9,408 $ 9,852
3/31/94 $ 9,197 $ 8,853 $ 9,451
4/30/94 $ 9,250 $ 8,905 $ 9,531
5/31/94 $ 9,355 $ 9,005 $ 9,614
6/30/94 $ 9,223 $ 8,878 $ 9,558
7/31/94 $ 9,440 $ 9,087 $ 9,730
8/31/94 $ 9,464 $ 9,110 $ 9,764
9/30/94 $ 9,271 $ 8,924 $ 9,621
10/31/94 $ 9,036 $ 8,698 $ 9,450
11/30/94 $ 8,818 $ 8,488 $ 9,279
12/31/94 $ 9,076 $ 8,737 $ 9,483
1/31/95 $ 9,434 $ 9,081 $ 9,754
2/28/95 $ 9,790 $ 9,424 $ 10,038
3/31/95 $ 9,847 $ 9,479 $ 10,153
4/30/95 $ 9,836 $ 9,468 $ 10,165
5/31/95 $ 10,119 $ 9,740 $ 10,490
6/30/95 $ 9,943 $ 9,572 $ 10,398
7/31/95 $ 9,996 $ 9,622 $ 10,496
8/31/95 $ 10,122 $ 9,743 $ 10,630
9/30/95 $ 10,163 $ 9,783 $ 10,697
10/31/95 $ 10,390 $ 10,001 $ 10,852
11/30/95 $ 10,616 $ 10,219 $ 11,032
12/31/95 $ 10,734 $ 10,332 $ 11,138
1/31/96 $ 10,775 $ 10,372 $ 11,223
2/28/96 $ 10,688 $ 10,289 $ 11,147
3/31/96 $ 10,514 $ 10,121 $ 11,004
4/30/96 $ 10,494 $ 10,102 $ 10,973
5/31/96 $ 10,510 $ 10,117 $ 10,969
6/30/96 $ 10,602 $ 10,206 $ 11,088
7/31/96 $ 10,686 $ 10,286 $ 11,189
</TABLE>
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 12/10/93. +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: [Graphic]
"The main focus of the Portfolio during this period was to preserve and improve
the Fund's responsiveness to interest rate moves. In a relatively quiet market,
the Fund's average years-to-call tends to shorten, which could impede upside
performance. Therefore, I've redoubled my efforts to trade out of bonds with
deteriorating call protection into issues with more favorable call features. The
challenge in doing that, of course, is to maintain the Fund's yield at a
relatively high level. Additionally, I've continued to explore bonds in the
non-rated and lower-rated investment grade segment. These are typically
research-driven, special situations that may afford unusually attractive yield
opportunities."
David C. Reilly
6
<PAGE> 7
EV TRADITIONAL CONNECTICUT MUNICIPALS FUND
YOUR INVESTMENT AT WORK
University of Connecticut
General Obligations, Series 96A
These bonds represented an attractive buying opportunity when added to the
portfolio in late May. At the time, bond market psychology was still relatively
negative, and, with their 5% discount coupon, these bonds were not as
aggressively priced as they would have been in a bullish environment. The Series
1996A bond issue represented the first debt sale by the University under its new
comprehensive capital program ("UConn 2000"). The ten-year, $1.25 billion
capital plan is designed to modernize, rehabilitate and expand the University's
physical plant. The 1996A bonds are essentially backed by the State of
Connecticut and further enhanced by FGIC insurance.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................91
Average quality................................A+
Investment grade.............................98.7%
Effective maturity...........................13.5 yrs.
Largest sectors:
Health care...............................12.5%
Housing...................................12.45
Insured hospital...........................9.8*
Solid waste................................8.4
Education..................................8.2
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: CONNECTICUT
Unemployment in Connecticut has fallen sharply in the past year, as employment
growth has outpaced that of the nation as a whole. The unemployment rate
declined in each of the first five months of the year, with 8,400 fewer people
on the state's jobless rolls. Non-farm job growth has resulted in a gain of more
than 13,000 jobs during that period, with the largest increases in the services
and trade areas. The construction, retail and finance sectors were particularly
strong, with government hiring also adding to the state's momentum. The
construction sector has enjoyed a rebound, with the number of construction
contracts more than doubling in the past year and reaching their highest level
since 1987. Manufacturing employment continued to register a loss, marking the
twelfth consecutive year of decline. Personal income for state residents is up
1.9%, according to the state's Department of Labor. The improved economy has
eased some of the state's fiscal pressures. Total tax collections are running
more than 9% above the FY 1995 level of $6.8 billion, driven primarily by an
increase in personal income tax collections. However, the state's accumulated
GAAP deficit must still be addressed.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional
Connecticut Municipals Fund (Including Sales Charge) and the Lehman Brothers
Municipal Bond Index From April 30, 1994, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
4/30/94 $ 10,000 $ 9,625 $ 10,000
5/31/94 $ 10,138 $ 9,757 $ 10,087
6/30/94 $ 10,034 $ 9,658 $ 10,028
7/31/94 $ 10,255 $ 9,871 $ 10,209
8/31/94 $ 10,275 $ 9,889 $ 10,244
9/30/94 $ 10,139 $ 9,759 $ 10,094
10/31/94 $ 9,861 $ 9,491 $ 9,915
11/30/94 $ 9,518 $ 9,161 $ 9,735
12/31/94 $ 9,807 $ 9,439 $ 9,949
1/31/95 $ 10,170 $ 9,789 $ 10,234
2/28/95 $ 10,509 $ 10,115 $ 10,532
3/31/95 $ 10,603 $ 10,205 $ 10,653
4/30/95 $ 10,621 $ 10,223 $ 10,665
5/31/95 $ 10,906 $ 10,497 $ 11,005
6/30/95 $ 10,775 $ 10,371 $ 10,909
7/31/95 $ 10,860 $ 10,453 $ 11,012
8/31/95 $ 11,020 $ 10,607 $ 11,152
9/30/95 $ 11,114 $ 10,698 $ 11,223
10/31/95 $ 11,276 $ 10,853 $ 11,386
11/30/95 $ 11,502 $ 11,071 $ 11,575
12/31/95 $ 11,600 $ 11,165 $ 11,686
1/31/96 $ 11,653 $ 11,216 $ 11,774
2/28/96 $ 11,538 $ 11,105 $ 11,695
3/31/96 $ 11,370 $ 10,943 $ 11,545
4/30/96 $ 11,366 $ 10,940 $ 11,513
5/31/96 $ 11,387 $ 10,960 $ 11,508
6/30/96 $ 11,507 $ 11,075 $ 11,634
7/31/96 $ 11,606 $ 11,171 $ 11,739
</TABLE>
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 4/19/94. +Index information is
available only at month-end; therefore, the line comparison begins at the next
month-end following the commencement of the Fund's investment operations.
FROM THE PORTFOLIO MANAGER: [Graphic]
"Portfolio activity during the period was characterized by an emphasis on
relative value, opportune trades to maintain the Portfolio's high book yield,
and continuing adjustments to improve call protection. Early in the period, I
swapped Puerto Rico bonds for Guam airport bonds, a trade that offered not only
higher yields, but also some potential for credit improvement. In March, I added
housing bonds subject to the Alternative Minimum Tax, which also typically
provide higher yields. Finally, I continued the Portfolio's emphasis on
improving call protection. The market treated bonds with inadequate call
protection harshly in recent months. By improving the Portfolio's call
characteristics, we've improved the Fund's upside potential."
Nicole Anderes
<PAGE> 8
EV TRADITIONAL MICHIGAN MUNICIPALS FUND
YOUR INVESTMENT AT WORK
City of Kalamazoo,MI
Kalamazoo Public Library
The proceeds of these bonds were used to finance improvements to the Kalamazoo
Library, which serves this community in southwestern Michigan. The project
included renovations to the Library's four existing branches as well as interior
renovations and the purchase of new furnishings for some additional facilities
of the Library. Kalamazoo is among the state's most economi-cally diverse
communities and has an especially strong industrial base. With a coupon of 5.9%,
this Aaa/AAA-rated bond is representative of management's recent efforts to add
value to the Portfolio through purchases of bonds of small but highly regarded
issuers.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................87
Average quality...............................AA-
Investment grade.............................97.9%
Effective maturity...........................15.6 yrs.
Largest sectors:
Insured general obligations...............16.8%*
Hospitals.................................14.8
Industrial develop./pollution control.....11.6
Insured hospitals.........................10.0*
Insured water & sewer......................8.1*
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: MICHIGAN
The Michigan economy continued to gather momentum in the first half of 1996, and
has now expanded more than twice as fast as the nation in the 5-year period
since 1991. The state's July unemployment rate was 4.7%, well below the
national rate of 5.4%. The state enjoys a $1.1 billion fiscal surplus, as tax
receipts continue to run above the pace of previous fiscal years. The Michigan
economy has been boosted by the resurgence in the auto industry, which now
accounts for 11% of the state's workforce. Detroit's Big Three enjoyed profits
totalling $13 billion in 1995, and as a signal of confidence in the industry's
future, Chrysler and General Motors have each unveiled plans to spend more than
$1 billion to expand manufacturing plant facilities in the state. Meanwhile, the
state has had success in drawing foreign investments. A revamped tax code is
generally viewed as friendlier to business and is seen as a strong incentive to
relocate within the state. For example, Thyssen, a large German steel producer,
has announced plans to build a steel processing plant in the metropolitan
Detroit area. Elsewhere, state welfare caseloads continue to decline, recently
reaching 90,000, a record low. Meanwhile, the state's wage and salary levels
continue to rise.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional Michigan
Municipals Fund (Including Sales Charge) and the Lehman Brothers Municipal Bond
Index From December 31, 1993, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
12/31/93 $ 10,000 $ 9,626 $ 10,000
1/31/94 $ 10,117 $ 9,738 $ 10,114
2/28/94 $ 9,815 $ 9,448 $ 9,852
3/31/94 $ 9,287 $ 8,940 $ 9,451
4/30/94 $ 9,339 $ 8,990 $ 9,531
5/31/94 $ 9,401 $ 9,050 $ 9,614
6/30/94 $ 9,299 $ 8,951 $ 9,558
7/31/94 $ 9,483 $ 9,128 $ 9,730
8/31/94 $ 9,505 $ 9,149 $ 9,764
9/30/94 $ 9,351 $ 9,001 $ 9,621
10/31/94 $ 9,104 $ 8,763 $ 9,450
11/30/94 $ 8,874 $ 8,542 $ 9,279
12/31/94 $ 9,120 $ 8,779 $ 9,483
1/31/95 $ 9,444 $ 9,090 $ 9,754
2/28/95 $ 9,745 $ 9,380 $ 10,038
3/31/95 $ 9,832 $ 9,464 $ 10,153
4/30/95 $ 9,830 $ 9,462 $ 10,165
5/31/95 $ 10,111 $ 9,732 $ 10,490
6/30/95 $ 9,945 $ 9,572 $ 10,398
7/31/95 $ 10,006 $ 9,632 $ 10,496
8/31/95 $ 10,130 $ 9,751 $ 10,630
9/30/95 $ 10,191 $ 9,809 $ 10,697
10/31/95 $ 10,382 $ 9,994 $ 10,852
11/30/95 $ 10,617 $ 10,220 $ 11,032
12/31/95 $ 10,755 $ 10,352 $ 11,138
1/31/96 $ 10,827 $ 10,422 $ 11,223
2/28/96 $ 10,694 $ 10,294 $ 11,147
3/31/96 $ 10,519 $ 10,125 $ 11,004
4/30/96 $ 10,486 $ 10,094 $ 10,973
5/31/96 $ 10,477 $ 10,085 $ 10,969
6/30/96 $ 10,590 $ 10,194 $ 11,088
7/31/96 $ 10,683 $ 10,283 $ 11,189
</TABLE>
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 12/7/93. +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: [Graphic]
"The Portfolio did not undergo any any major restructuring during the period.
Rather, we continued our long-standing barbell strategy - which emphasizes
discount bonds for their appreciation potential and high coupon issues for their
defensive qualities. With the Michigan tax-exempt market characterized by
unusually high volume and the retail segment of the market quite active, the
Portfolio continued to search for opportunities to trade the Portfolio or to add
relative value for the long-term. The Portfolio benefited especially from its
commitment to Detroit general obligations, which have performed very well as the
City's economy continues to improve."
Timothy T. Browse
8
<PAGE> 9
EV TRADITIONAL MINNESOTA MUNICIPALS FUND
YOUR INVESTMENT AT WORK
St. Paul MN Housing and Development Authority
Health East Hospital
This bond is another example of the Portfolio's attempts to add value through
special situations. The issue represented an improving credit with a very
attractive 6.625% coupon. Given the fact that the Minnesota market is dominated
by insured bonds and high-rated, investment-grade issues, a lower-rated,
investment-grade issue like this one is a relative rarity. This Baa/BBB- bond
contributed to our efforts to maintain the Portfolio's yield, while the
Portfolio continued to improve its upside potential and call protection.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................68
Average quality................................Aa
Investment grade.............................98.6%
Effective maturity...........................13.1 yrs.
Largest sectors:
Housing...................................20.4%
Insured hospitals.........................15.8*
Hospitals.................................13.6
Indust. development/pollution control......9.8
General obligations........................7.2
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: MINNESOTA
The Minnesota economy moderated slightly in the first half of 1996, with
non-farm employment falling slightly below its historical average. Nonetheless,
Minnesota's unemployment rate, at 3.4%, remained significantly below the
national rate. With small companies continuing to dominate job creation,
Minnesota job growth has been fueled by large gains in the finance, trade and
services sectors. Interestingly, manufacturing showed some surprising pockets of
strength, especially in printing, wood products, industrial machinery and
computers, and metal and plastic products. The construction industry also showed
signs of improvement, with the value of heavy construction of plants and
equipment rising sharply, while single family housing contracts also rose
significantly. Meanwhile, the state's agricultural sector continues to be among
the healthiest in the region. Although weather was a cause for concern, the
outlook for crops and farm income generally remained positive. Prices for
cropland were 5% higher than one year ago. Due to Minnesota's above-average
employment base, tax receipts remain strong and put Minnesota on firm financial
footing.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional
Minnesota Municipals Fund (Including Sales Charge) and the Lehman Brothers
Municipal Bond Index From December 31, 1993, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
12/31/93 $ 10,000 $ 9,627 $ 10,000
1/31/94 $ 10,095 $ 9,718 $ 10,114
2/28/94 $ 9,875 $ 9,506 $ 9,852
3/31/94 $ 9,401 $ 9,050 $ 9,451
4/30/94 $ 9,424 $ 9,072 $ 9,531
5/31/94 $ 9,528 $ 9,173 $ 9,614
6/30/94 $ 9,448 $ 9,095 $ 9,558
7/31/94 $ 9,613 $ 9,254 $ 9,730
8/31/94 $ 9,637 $ 9,277 $ 9,764
9/30/94 $ 9,464 $ 9,111 $ 9,621
10/31/94 $ 9,209 $ 8,865 $ 9,450
11/30/94 $ 8,919 $ 8,586 $ 9,279
12/31/94 $ 9,208 $ 8,864 $ 9,483
1/31/95 $ 9,501 $ 9,146 $ 9,754
2/28/95 $ 9,824 $ 9,458 $ 10,038
3/31/95 $ 9,934 $ 9,564 $ 10,153
4/30/95 $ 9,913 $ 9,543 $ 10,165
5/31/95 $ 10,162 $ 9,783 $ 10,490
6/30/95 $ 9,988 $ 9,615 $ 10,398
7/31/95 $ 10,040 $ 9,665 $ 10,496
8/31/95 $ 10,176 $ 9,796 $ 10,630
9/30/95 $ 10,228 $ 9,846 $ 10,697
10/31/95 $ 10,399 $ 10,011 $ 10,852
11/30/95 $ 10,603 $ 10,208 $ 11,032
12/31/95 $ 10,753 $ 10,352 $ 11,138
1/31/96 $ 10,761 $ 10,360 $ 11,223
2/28/96 $ 10,675 $ 10,276 $ 11,147
3/31/96 $ 10,456 $ 10,066 $ 11,004
4/30/96 $ 10,481 $ 10,090 $ 10,973
5/31/96 $ 10,508 $ 10,116 $ 10,969
6/30/96 $ 10,589 $ 10,194 $ 11,088
7/31/96 $ 10,684 $ 10,285 $ 11,189
</TABLE>
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 12/9/93. +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: [Graphic]
"I've primarily emphasized improving the Fund's responsiveness to interest rates
in recent months. Typically, as bonds age, they may become less responsive to
interest rates if call protection shortens. Therefore, I've traded bonds with
eroding call protection for bonds with more favorable call characteristics.
Since many of those callable bonds were issued when prevailing yield levels were
higher, the challenge is to preserve the Fund's yield in a market that is
dominated by investment-grade and insured issues. To this end, I continue to
pursue aggressively bonds in the non-rated and lower-rated, investment-grade
segment where we can offer significant value to the Fund."
David C. Reilly
9
<PAGE> 10
EV TRADITIONAL NEW JERSEY MUNICIPALS FUND
YOUR INVESTMENT AT WORK
Port Authority of NY & NJ
Kennedy International Airport
Special Obligation Revenue Bonds
The Port Authority of New York and New Jersey is a joint authority that oversees
the administration of the area's metropolitan airports, sea terminals, tunnels,
and highways. This special obligation issue provided funding for a power plant
that generates electricity and steam for the Kennedy airport facility. The bond
with ten years of call protection - is a good example of our ongoing efforts to
improve the Portfolio's average call protection while finding good value in
non-rated issues. The bond has a very compelling 6.75% coupon.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues..............................121
Average quality.................................A
Investment grade.............................84.3%
Effective maturity...........................12.8 yrs.
Largest sectors:
General obligations.......................13.9%
Transportation............................12.4
Industrial develop./pollution control......9.6
Hospitals..................................7.5
Cogeneration...............................5.3
================================================================================
THE STATE OF THE STATE: NEW JERSEY
The New Jersey economy has showed signs of improvement, but continues to lag the
national trends. The state's July unemployment rate of 6.1% was some-what higher
than the national rate. The bulk of new jobs produced in New Jersey during the
six-month period has been in the services sector, including business services,
healthcare, and retail trade. The construction sector has presented a mixed
picture. Through the first four months of 1996, residential construction permits
declined 11% from the same period a year ago, in part due to unfavorable weather
conditions. Highway and other infrastructure projects, however, increased
significantly. The administration's regulatory reforms have helped draw
businesses to the state, which has boosted job growth. New Jersey's budget
continues to enjoy a healthy surplus, although payments to the state pension
fund have been reduced. The state's three-year, 30% tax cut and continuing cost
controls continue to give New Jersey a high profile among states seeking to lift
economic growth. New Jersey revenues rose to $4.7 billion in 1995 from $4.5
billion in 1994.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional New
Jersey Municipals Fund (Including Sales Charge) and the Lehman Brothers
Municipal Bond Index From April 30, 1994, through July 31, 1996
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
4/30/94 $ 10,000 $ 9,622 $ 10,000
5/31/94 $ 10,110 $ 9,728 $ 10,087
6/30/94 $ 10,017 $ 9,639 $ 10,028
7/31/94 $ 10,180 $ 9,796 $ 10,209
8/31/94 $ 10,262 $ 9,875 $ 10,244
9/30/94 $ 10,137 $ 9,755 $ 10,094
10/31/94 $ 9,920 $ 9,546 $ 9,915
11/30/94 $ 9,659 $ 9,294 $ 9,735
12/31/94 $ 9,941 $ 9,566 $ 9,949
1/31/95 $ 10,267 $ 9,879 $ 10,234
2/28/95 $ 10,536 $ 10,139 $ 10,532
3/31/95 $ 10,621 $ 10,220 $ 10,653
4/30/95 $ 10,641 $ 10,239 $ 10,665
5/31/95 $ 10,920 $ 10,508 $ 11,005
6/30/95 $ 10,800 $ 10,392 $ 10,909
7/31/95 $ 10,854 $ 10,444 $ 11,012
8/31/95 $ 10,985 $ 10,570 $ 11,152
9/30/95 $ 11,059 $ 10,642 $ 11,223
10/31/95 $ 11,257 $ 10,832 $ 11,386
11/30/95 $ 11,454 $ 11,022 $ 11,575
12/31/95 $ 11,576 $ 11,139 $ 11,686
1/31/96 $ 11,665 $ 11,225 $ 11,774
2/28/96 $ 11,516 $ 11,082 $ 11,695
3/31/96 $ 11,415 $ 10,984 $ 11,545
4/30/96 $ 11,402 $ 10,971 $ 11,513
5/31/96 $ 11,402 $ 10,971 $ 11,508
6/30/96 $ 11,502 $ 11,068 $ 11,634
7/31/96 $ 11,582 $ 11,145 $ 11,739
</TABLE>
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 4/13/94. +Index information is
available only at month-end; therefore, the line comparison begins at the next
month-end following the commencement of the Fund's investment operations.
FROM THE PORTFOLIO MANAGER: [GRAPHIC]
" The New Jersey market was characterized by relatively tight supply during this
period. I generally focused on upgrading the quality of the Portfolio and
increasing call protection. Our largest single holding was the Port Authority of
New York and New Jersey, a major entity in the metropolitan area. I generally
avoided local general obligations, because local communities may be faced with
higher spending as a result of the state tax cuts. Meanwhile, I remained very
selective with respect to the hospital sector due to an increasingly competitive
environment. Finally, I pared back our solid waste bond holdings. That sector
has become increasingly difficult to evaluate because of adverse court rulings."
Robert B. MacIntosh
10
<PAGE> 11
EV TRADITIONAL PENNSYLVANIA MUNICIPALS FUND
YOUR INVESTMENT AT WORK
Pennsylvania Health/Education
Finance Authority
Cedar Crest College
Located in Allentown, PA, Cedar Crest College has, like many other small
colleges, faced the challenge of changing demographics and declining admissions.
While that represented a threat to revenues earlier in the decade, the college
now appears to have surmounted that crisis and is well along the road to
stability. This lower investment-grade issue has an attractive coupon of 6.7%,
which helps enhance the Fund's yield. This issue is a good example of the
Portfolio's efforts to add selective, lower-rated, investment-grade bonds for
their yield advantage over other long-term Pennsylvania issues.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues..............................135
Average quality................................A+
Investment grade.............................88.7%
Effective maturity...........................12.5 yrs.
Largest sectors:
Hospitals.................................19.0%
Industrial develop./pollution control.....10.5
Insured general obligations................9.3*
Housing....................................7.7
Escrowed...................................6.8
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: PENNSYLVANIA
While the national economy continues to register growth, progress in
Pennsylvania has been uneven, with the lower-cost, centrally located areas
continuing to outpace the Pittsburgh and Philadelphia metropolitian areas.
Mirroring the job growth at the national level, Pennsylvania experienced a surge
in employment gains in the early summer months. In June, the commonwealth's
unemployment rate fell to 5.1% from 5.9% in May. The dramatic improvement was a
result of strong job growth, with 50,000 jobs added in June alone, pushing total
employment to its highest level in seven years. The construction industry was
responsible for the bulk of new jobs added during the summer, as the industry
saw a surge in housing starts that exceeded most expectations. Retail trade,
services and government also added significantly to the job picture. Personal
income levels for commonwealth residents continued to rise in recent months,
fueling the improvement in the retail sector. Pennsylvania's fiscal outlook
continues to improve, having benefited from tax reforms, government cost
controls, and a slowly improving economy.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional
Pennsylvania Municipals Fund (Including Sales Charge) and the Lehman Brothers
Municipal Bond Index From June 30, 1994, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
6/30/94 $ 10,000 $ 9,621 $ 10,000
7/31/94 $ 10,191 $ 9,806 $ 10,180
8/31/94 $ 10,211 $ 9,825 $ 10,216
9/30/94 $ 10,067 $ 9,686 $ 10,066
10/31/94 $ 9,851 $ 9,478 $ 9,887
11/30/94 $ 9,541 $ 9,179 $ 9,708
12/31/94 $ 9,758 $ 9,388 $ 9,922
1/31/95 $ 10,059 $ 9,678 $ 10,206
2/28/95 $ 10,336 $ 9,944 $ 10,502
3/31/95 $ 10,462 $ 10,065 $ 10,623
4/30/95 $ 10,460 $ 10,064 $ 10,636
5/31/95 $ 10,799 $ 10,390 $ 10,975
6/30/95 $ 10,679 $ 10,275 $ 10,879
7/31/95 $ 10,743 $ 10,337 $ 10,982
8/31/95 $ 10,872 $ 10,460 $ 11,121
9/30/95 $ 10,957 $ 10,542 $ 11,192
10/31/95 $ 11,141 $ 10,719 $ 11,354
11/30/95 $ 11,368 $ 10,938 $ 11,543
12/31/95 $ 11,489 $ 11,054 $ 11,654
1/31/96 $ 11,565 $ 11,127 $ 11,742
2/28/96 $ 11,495 $ 11,060 $ 11,662
3/31/96 $ 11,339 $ 10,909 $ 11,513
4/30/96 $ 11,325 $ 10,896 $ 11,481
5/31/96 $ 11,325 $ 10,896 $ 11,476
6/30/96 $ 11,413 $ 10,980 $ 11,602
7/31/96 $ 11,526 $ 11,089 $ 11,707
</TABLE>
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 6/1/94. +Index information is
available only at month-end; therefore, the line comparison begins at the next
month-end following the commencement of the Fund's investment operations.
FROM THE PORTFOLIO MANAGER: [Graphic]
"I've employed a barbell approach, which lessened volatility in a declining
market. This barbell structure balances high-coupon issues - attractive for
their relatively strong income component and good defensive characteristics -
with discount bonds that are typically more sensitive to rate changes and may
provide upside potential. Because the Pennsylvania market is very heavily
weighted in hospitals, I've concentrated on the high-quality institutions that
our research suggests will likely emerge as the winners in an increasingly
competitive marketplace. To further improve liquidity, I've added more insured
issues to the Fund. Finally, I've focused on maintaining good call protection as
the market has been more punitive in recent months towards bonds with poor call
characteristics."
Timothy T. Browse
11
<PAGE> 12
EV TRADITIONAL TEXAS MUNICIPALS FUND
YOUR INVESTMENT AT WORK
Dallas Housing Finance Corp.
Single Family Mortgage Bonds
Single family housing bonds offer defensive characteristics because they
typically hold their value better in a rising interest rate environment than
other municipal bonds. They also offer higher yields, which is advantageous in a
flat rate environment. The Dallas housing bonds, with their 7.95% coupon, are a
good example: they offer above-average yields and perform like an intermediate
maturity bond in most interest rate scenarios. The proceeds of the bond were
used to make mortgage loans to moderate income borrowers. The mortgages are
backed by GNMA certificates, which garner S&P's AAA-rating for the bonds.
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Based on market value as of July 31, 1996
Number of issues...............................51
Average quality...............................AA-
Investment grade.............................94.7%
Effective maturity...........................13.6 yrs.
Largest sectors:
Insured electric utilities................17.9*%
Industrial develop./pollution control.....13.2
General obligations.......................12.6
Hospitals.................................10.1
Housing....................................9.4
* Private insurance does not remove the risk of loss of principal due to
changes in market conditions that is associated with this investment.
================================================================================
THE STATE OF THE STATE: TEXAS
The Texas economy remains very healthy, although there has been a deceleration
in job growth as the manufacturing sector slows from its pace of the past two
years. Technology has accounted for about 60% of the manufacturing jobs created
in recent years. Construction has been another area of robust growth. Following
a lackluster pace early in the decade, construction employment grew 8% in 1995
as housing and commercial construction starts each rose around 40%. In contrast
to these healthy industries, the oil and energy sectors continued to suffer from
weak pricing and a shift in drilling activity overseas. While rising global
demand should help, energy-related employment is expected to remain relatively
flat. Finally, the agriculture sector has suffered from a continuing drought in
the Southwest that has sharply increased feedstock prices and resulted in large
losses for crop and livestock producers alike. While these sectors await a
change in fortune, Texas benefits from its increasingly diversified economy. The
state's overall economic growth is expected to continue to outpace that of the
nation in coming years.
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment in EV Traditional Texas
Municipals Fund (Including Sales Charge) and the Lehman Brothers Municipal Bond
Index From December 31, 1993, through July 31, 1996
<TABLE>
<CAPTION>
Fund incl.
Date Fund at NAV sales chg. Index
<S> <C> <C> <C>
12/31/93 $ 10,000 $ 9,625 $ 10,000
1/31/94 $ 10,141 $ 9,760 $ 10,114
2/28/94 $ 9,822 $ 9,453 $ 9,852
3/31/94 $ 9,275 $ 8,927 $ 9,451
4/30/94 $ 9,321 $ 8,971 $ 9,531
5/31/94 $ 9,418 $ 9,064 $ 9,614
6/30/94 $ 9,328 $ 8,978 $ 9,558
7/31/94 $ 9,549 $ 9,190 $ 9,730
8/31/94 $ 9,585 $ 9,226 $ 9,764
9/30/94 $ 9,403 $ 9,050 $ 9,621
10/31/94 $ 9,138 $ 8,795 $ 9,450
11/30/94 $ 8,847 $ 8,515 $ 9,279
12/31/94 $ 9,141 $ 8,798 $ 9,483
1/31/95 $ 9,482 $ 9,126 $ 9,754
2/28/95 $ 9,811 $ 9,443 $ 10,038
3/31/95 $ 9,893 $ 9,521 $ 10,153
4/30/95 $ 9,873 $ 9,502 $ 10,165
5/31/95 $ 10,171 $ 9,789 $ 10,490
6/30/95 $ 9,996 $ 9,621 $ 10,398
7/31/95 $ 10,041 $ 9,664 $ 10,496
8/31/95 $ 10,159 $ 9,777 $ 10,630
9/30/95 $ 10,212 $ 9,829 $ 10,697
10/31/95 $ 10,387 $ 9,997 $ 10,852
11/30/95 $ 10,594 $ 10,197 $ 11,032
12/31/95 $ 10,703 $ 10,301 $ 11,138
1/31/96 $ 10,768 $ 10,364 $ 11,223
2/28/96 $ 10,657 $ 10,257 $ 11,147
3/31/96 $ 10,536 $ 10,141 $ 11,004
4/30/96 $ 10,527 $ 10,132 $ 10,973
5/31/96 $ 10,553 $ 10,157 $ 10,969
6/30/96 $ 10,645 $ 10,246 $ 11,088
7/31/96 $ 10,729 $ 10,326 $ 11,189
</TABLE>
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 12/8/93. +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: [Graphic]
"The Portfolio has been fairly well-structured for many months and, therefore,
this period was marked by relatively little activity. My main focus was to
upgrade the Portfolio's book yield and to increase the Portfolio's defensive
characteristics. Several new industrial development issues, including bonds for
Federal Express Company and Texas Instruments, afforded attractive yield
opportunities. To improve the Portfolio's defensive qualities, I added housing
bonds. Housing issues typically offer higher yields and tend to fare better in a
rising rate environment than do discount bonds or par bonds."
Nicole Anderes
<PAGE> 13
EV Traditional Municipals Funds
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $1,579,048 $2,266,052 $ 1,946,106 $1,563,467
Unrealized appreciation 42,228 47,248 45,266 65,994
---------- -------- ---------- ----------
Total investment in Portfolio, at value (Note 1A) $1,621,276 $2,313,300 $ 1,991,372 $1,629,461
Receivable from the Administrator (Note 5) 19,116 20,152 24,364 23,512
Deferred organization expenses (Note 1D) 4,891 4,129 5,661 5,155
---------- -------- ---------- ----------
Total assets $1,645,283 $2,337,581 $ 2,021,397 $1,658,128
---------- -------- ---------- ----------
LIABILITIES:
Dividends payable $ 4,205 $ 2,575 $ 6,463 $ 5,031
Payable for Fund shares redeemed -- 2,000 961 --
Accrued expenses 2,469 3,010 1,286 2,142
---------- -------- ---------- ----------
Total liabilities $ 6,674 $ 7,585 $ 8,710 $ 7,173
---------- -------- ---------- ----------
NET ASSETS $1,638,609 $2,329,996 $ 2,012,687 $1,650,955
========== ======== ========== ==========
SOURCES OF NET ASSETS:
Paid-in capital $1,725,529 $2,438,169 $ 1,973,892 $1,884,903
Accumulated net realized loss on investment and
financial futures transactions (computed on
the basis of identified cost) (131,074 ) (159,782 ) (1,363) (312,329 )
Accumulated undistributed (distributions in excess of)
net investment income 1,926 4,361 (5,108) 12,387
Unrealized appreciation of investments and financial
futures contracts from Portfolio (computed on the
basis of identified cost) 42,228 47,248 45,266 65,994
---------- -------- ---------- ----------
Total $1,638,609 $2,329,996 $ 2,012,687 $1,650,955
========== ======== ========== ==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 170,526 248,679 197,238 175,416
========== ======== ========== ==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(net assets / shares of beneficial interest
outstanding) $9.61 $9.37 $10.20 $9.41
====== ====== ======= ======
COMPUTATION OF OFFERING PRICE PER SHARE
(100/96.25 of net asset value per share) $9.98 $9.74 $10.60 $9.78
====== ====== ======= ======
</TABLE>
On sales of $50,000 or more, the offering price is reduced.
See notes to financial statements
13
<PAGE> 14
FINANCIAL STATEMENTS (continued)
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $1,431,964 $3,431,985 $2,964,704 $ 355,908
Unrealized appreciation (depreciation) 125,179 35,880 17,232 (8,947)
---------- ---------- ---------- --------
Total investment in Portfolio, at value (Note 1A) $1,557,143 $3,467,865 $2,981,936 $ 346,961
Receivable for Fund shares sold -- -- 33,604 --
Receivable from the Administrator (Note 5) 24,485 25,726 27,368 20,325
Deferred organization expenses (Note 1D) 6,361 4,619 1,043 6,632
---------- ---------- ---------- --------
Total assets $1,587,989 $3,498,210 $3,043,951 $ 373,918
---------- ---------- ---------- --------
LIABILITIES:
Dividends payable $ 2,845 $ 8,533 $ 7,484 $ 891
Accrued expenses 2,323 1,390 1,694 1,607
---------- ---------- ---------- --------
Total liabilities $ 5,168 $ 9,923 $ 9,178 $ 2,498
---------- ---------- ---------- --------
NET ASSETS $1,582,821 $3,488,287 $3,034,773 $ 371,420
========== ========== ========== ========
SOURCES OF NET ASSETS:
Paid-in capital $1,730,429 $3,481,946 $3,006,957 $ 453,464
Accumulated net realized gain (loss) on investment and
financial futures transactions (computed on the
basis of identified cost) (284,263 ) (25,497 ) 9,432 (72,206)
Accumulated undistributed (distributions in excess of )
net investment income 11,476 (4,042 ) 1,152 (891)
Unrealized appreciation (depreciation) of investments
and financial futures contracts from Portfolio
(computed on the basis of identified cost) 125,179 35,880 17,232 (8,947)
---------- ---------- ---------- --------
Total $1,582,821 $3,488,287 $3,034,773 $ 371,420
========== ========== ========== ========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 168,445 346,931 300,107 39,832
========== ========== ========== ========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
(net assets / shares of beneficial interest
outstanding) $9.40 $10.05 $10.11 $9.32
====== ======= ======= ======
COMPUTATION OF OFFERING PRICE PER SHARE
(100/96.25 of net asset value per share) $9.77 $10.44 $10.50 $9.68
====== ======= ======= ======
</TABLE>
On sales of $50,000 or more, the offering price is reduced.
See notes to financial statements
14
<PAGE> 15
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $ 131,648 $ 128,057 $94,458 $ 184,424
Expenses allocated from Portfolio (11,037) (7,448) (7,867) (16,227)
---------- --------- - -------- -- --------- -
Net investment income from Portfolio $ 120,611 $ 120,609 $86,591 $ 168,197
---------- --------- - -------- -- --------- -
Expenses --
Distribution costs (Notes 6 and 7) $ 13,660 $ 11,233 $ 909 $ 21,839
Custodian fees (Note 1E) 4,065 3,468 3,499 3,355
Registration costs -- -- 1,013 --
Legal and accounting services 6,126 5,416 4,805 8,200
Transfer and dividend disbursing agent fees 1,897 1,544 1,230 2,611
Amortization of organization expenses (Note 1D) 2,068 1,777 2,115 2,205
Printing and postage 9,093 8,798 10,752 9,511
Miscellaneous 1,655 2,553 1,211 3,163
---------- --------- - -------- -- --------- -
Total expenses $ 38,564 $ 34,789 $25,534 $ 50,884
Deduct -- Allocation of expenses to the
Administrator (Note 5) 19,116 20,152 24,364 23,512
---------- --------- - -------- -- --------- -
Net expenses $ 19,448 $ 14,637 $ 1,170 $ 27,372
---------- --------- - -------- -- --------- -
Net investment income $ 101,163 $ 105,972 $85,421 $ 140,825
---------- --------- - -------- -- --------- -
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ 7,764 $ 4,200 $10,013 $ 41,634
Financial futures contracts 1,632 (6,754) 610 532
---------- --------- - -------- -- --------- -
Net realized gain (loss) on investments $ 9,396 $ (2,554) $10,623 $ 42,166
Change in unrealized appreciation (depreciation) of
investments and financial futures contracts 33,782 8,698 (3,111) 111,747
---------- --------- - -------- -- --------- -
Net realized and unrealized gain $ 43,178 $ 6,144 $ 7,512 $ 153,913
---------- --------- - -------- -- --------- -
Net increase in net assets from operations $ 144,341 $ 112,116 $92,933 $ 294,738
========== ========== ========== ==========
</TABLE>
See notes to financial statements
15
<PAGE> 16
FINANCIAL STATEMENTS (continued)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $ 164,558 $ 155,908 $138,470 $ 25,484
Expenses allocated from Portfolio (12,560) (12,722) (10,612) (1,117)
-------- ------- ------- ---------
Net investment income from Portfolio $ 151,998 $ 143,186 $127,858 $ 24,367
-------- ------- ------- ---------
Expenses --
Distribution costs (Notes 6 and 7) $ 18,458 $ 1,126 $ 1,033 $ 2,804
Custodian fees (Note 1E) 3,599 3,467 3,000 3,501
Legal and accounting services 6,358 5,431 5,649 4,313
Transfer and dividend disbursing agent fees 1,996 1,547 1,412 389
Amortization of organization expenses (Note 1D) 2,736 1,713 4,952 2,956
Printing and postage 9,411 12,800 13,014 8,098
Miscellaneous 1,868 1,505 1,731 1,645
-------- ------- ------- ---------
Total expenses $ 44,426 $ 27,589 $ 30,791 $ 23,706
-------- ------- ------- ---------
Deduct --
Allocation of expenses to the Administrator
(Note 5) $ 24,485 $ 25,726 $ 27,368 $ 20,325
Reduction of Custodian fee (Note 1E) -- -- 2,500 49
-------- ------- ------- ---------
Total $ 24,485 $ 25,726 $ 29,868 $ 20,374
-------- ------- ------- ---------
Net expenses $ 19,941 $ 1,863 $ 923 $ 3,332
-------- ------- ------- ---------
Net investment income $ 132,057 $ 141,323 $126,935 $ 21,035
-------- ------- ------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ 48,482 $ (6,867) $ 13,867 $ (11,745)
Financial futures contracts (11,620) 2,406 8,068 757
-------- ------- ------- ---------
Net realized gain (loss) on investments $ 36,862 $ (4,461) $ 21,935 $ (10,988)
Change in unrealized appreciation (depreciation) of
investments and financial futures contracts 65,082 11,739 (10,204) 22,842
-------- ------- ------- ---------
Net realized and unrealized gain $ 101,944 $ 7,278 $ 11,731 $ 11,854
-------- ------- ------- ---------
Net increase in net assets from
operations $ 234,001 $ 148,601 $138,666 $ 32,889
======== ======= ======= =========
</TABLE>
See notes to financial statements
16
<PAGE> 17
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 101,163 $ 105,972 $ 85,421 $ 140,825
Net realized gain (loss) on investments 9,396 (2,554 ) 10,623 42,166
Change in unrealized appreciation (depreciation) of
investments 33,782 8,698 (3,111 ) 111,747
----------- ----------- ---------- ----------
Net increase in net assets from operations $ 144,341 $ 112,116 $ 92,933 $ 294,738
----------- ----------- ---------- ----------
Distributions to shareholders (Note 3) --
From net investment income $ (107,642 ) $ (107,826 ) $ (85,421 ) $ (142,749 )
In excess of net investment income -- -- (3,593 ) --
----------- ----------- ---------- ----------
Total distributions to shareholders $ (107,642 ) $ (107,826 ) $ (89,014 ) $ (142,749 )
----------- ----------- ---------- ----------
Transactions in shares of beneficial interest (Note
4) --
Proceeds from sales of shares $ 400,426 $ 844,410 $1,030,778 $ 222,213
Net asset value of shares issued to shareholders in
payment of distributions declared 65,502 84,011 27,507 101,807
Cost of shares redeemed (1,329,228 ) (573,822 ) (164,400 ) (3,300,480 )
----------- ----------- ---------- ----------
Increase (decrease) in net assets from Fund share
transactions $ (863,300 ) $ 354,599 $ 893,885 $(2,976,460)
----------- ----------- ---------- ----------
Net increase (decrease) in net assets $ (826,601 ) $ 358,889 $ 897,804 $(2,824,471)
NET ASSETS:
At beginning of year 2,465,210 1,971,107 1,114,883 4,475,426
----------- ----------- ---------- ----------
At end of year $1,638,609 $2,329,996 $2,012,687 $1,650,955
============ ========== ========== ============
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF )
NET INVESTMENT INCOME INCLUDED IN NET ASSETS AT END OF
YEAR $ 1,926 $ 4,361 $ (5,108 ) $ 12,387
============ ========== ========== ============
</TABLE>
See notes to financial statements
17
<PAGE> 18
FINANCIAL STATEMENTS (continued)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 132,057 $ 141,323 $ 126,935 $ 21,035
Net realized gain (loss) on investments 36,862 (4,461 ) 21,935 (10,988)
Change in unrealized appreciation (depreciation)
of investments 65,082 11,739 (10,204) 22,842
----------- -------- ---------- ----------
Net increase in net assets from operations $ 234,001 $ 148,601 $ 138,666 $ 32,889
----------- -------- ---------- ----------
Distributions to shareholders (Note 3) --
From net investment income $ (133,284 ) $(141,323 ) $ (125,218) $ (21,069)
In excess of net investment income -- (2,626 ) -- (1,246)
----------- -------- ---------- ----------
Total distributions to shareholders $ (133,284 ) $(143,949 ) $ (125,218) $ (22,315)
----------- -------- ---------- ----------
Transactions in shares of beneficial interest (Note
4) --
Proceeds from sales of shares $ 505,071 $2,124,862 $2,397,173 $ 116,145
Net asset value of shares issued to shareholders
in payment of distributions declared 69,451 66,273 60,548 18,656
Cost of shares redeemed (2,780,729 ) (419,131 ) (923,076) (242,576)
----------- -------- ---------- ----------
Increase (decrease) in net assets from Fund
share transactions $(2,206,207) $1,772,004 $1,534,645 $(107,775)
----------- -------- ---------- ----------
Net increase (decrease) in net assets $(2,105,490) $1,776,656 $1,548,093 $ (97,201)
NET ASSETS:
At beginning of year 3,688,311 1,711,631 1,486,680 468,621
----------- -------- ---------- ----------
At end of year $1,582,821 $3,488,287 $3,034,773 $ 371,420
=========== ======== ========== ==========
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME INCLUDED IN NET ASSETS
AT END OF YEAR $ 11,476 $ (4,042 ) $ 1,152 $ (891)
=========== ======== ========== ==========
</TABLE>
See notes to financial statements
18
<PAGE> 19
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 142,233 $ 112,225 $ 35,760 $ 254,745
Net realized loss on investments (118,852 ) (137,638 ) (11,964 ) (240,259 )
Change in unrealized appreciation of investments 158,005 125,129 46,738 255,527
----------- -------- ---------- ----------
Net increase in net assets from operations $ 181,386 $ 99,716 $ 70,534 $ 270,013
----------- -------- ---------- ----------
Distributions to shareholders (Note 3) --
From net investment income $ (142,233 ) $ (112,225 ) $ (35,760 ) $ (254,745 )
In excess of net investment income (7,151 ) (3,110 ) (1,438 ) (14,453 )
----------- -------- ---------- ----------
Total distributions to shareholders $ (149,384 ) $ (115,335 ) $ (37,198 ) $ (269,198 )
----------- -------- ---------- ----------
Transactions in shares of beneficial interest (Note
4) --
Proceeds from sales of shares $2,579,387 $1,183,260 $1,185,803 $ 824,670
Net asset value of shares issued to shareholders in
payment of distributions declared 107,328 82,822 12,415 219,640
Cost of shares redeemed (2,665,165 ) (1,621,569 ) (279,831 ) (2,935,769 )
----------- -------- ---------- ----------
Increase (decrease) in net assets from Fund share
transactions $ 21,550 $ (355,487 ) $ 918,387 $(1,891,459)
----------- -------- ---------- ----------
Net increase (decrease) in net assets $ 53,552 $ (371,106 ) $ 951,723 $(1,890,644)
NET ASSETS:
At beginning of year 2,411,658 2,342,213 163,160 6,366,070
----------- -------- ---------- ----------
At end of year $2,465,210 $1,971,107 $1,114,883 $4,475,426
=========== ======== ========== ==========
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF )
INVESTMENT INCOME INCLUDED IN NET ASSETS AT END OF YEAR $ 8,405 $ 6,215 $ (1,515 ) $ 14,311
=========== ======== ========== ==========
</TABLE>
See notes to financial statements
19
<PAGE> 20
FINANCIAL STATEMENTS (continued)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 231,621 $ 56,056 $ 33,199 $ 37,914
Net realized loss on investments (305,440 ) (21,024 ) (12,503) (47,925 )
Change in unrealized appreciation of investments 307,608 23,112 27,034 13,112
----------- -------- ---------- ----------
Net increase in net assets from operations $ 233,789 $ 58,144 $ 47,730 $ 3,101
----------- -------- ---------- ----------
Distributions to shareholders (Note 3) --
From net investment income $ (231,621 ) $ (56,056 ) $ (33,199) $ (37,914 )
In excess of net investment income (11,629 ) (1,355 ) (474) (2,657 )
----------- -------- ---------- ----------
Total distributions to shareholders $ (243,250 ) $ (57,411 ) $ (33,673) $ (40,571 )
----------- -------- ---------- ----------
Transactions in shares of beneficial interest (Note
4) --
Proceeds from sales of shares $1,422,669 $1,752,811 $1,594,537 $ 111,406
Net asset value of shares issued to shareholders
in payment of distributions declared 73,152 19,133 13,089 22,726
Cost of shares redeemed (2,749,588 ) (357,531 ) (229,836) (774,799 )
----------- -------- ---------- ----------
Increase (decrease) in net assets from Fund
share transactions $(1,253,767) $1,414,413 $1,377,790 $ (640,667 )
----------- -------- ---------- ----------
Net increase (decrease) in net assets $(1,263,228) $1,415,146 $1,391,847 $ (678,137 )
NET ASSETS:
At beginning of year 4,951,539 296,485 94,833 1,146,758
----------- -------- ---------- ----------
At end of year $3,688,311 $1,711,631 $1,486,680 $ 468,621
=========== ======== ========== ==========
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF ) NET INVESTMENT INCOME INCLUDED IN NET ASSETS AT
END OF YEAR $ 12,703 $ (1,416 ) $ (608) $ 34
=========== ======== ========== ==========
</TABLE>
See notes to financial statements
20
<PAGE> 21
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL
ARIZONA FUND COLORADO FUND
-------------------------------- --------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
-------------------------------- --------------------------------
1996 1995 1994* 1996 1995 1994*
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.510 $ 9.390 $ 10.000 $ 9.230 $ 9.180 $ 10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.449 $ 0.432 $ 0.253 $ 0.471 $ 0.450 $ 0.256
Net realized and unrealized gain (loss) on
investments 0.129 0.142 (0.563) 0.148 0.062++ (0.761)
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.578 $ 0.574 $ (0.310) $ 0.619 $ 0.512 $ (0.505)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.478) $(0.432) $ (0.253) $(0.479) $(0.450) $ (0.256)
In excess of net investment income -- (0.022) (0.047) -- (0.012) (0.059)
------- ------- ------- ------- ------- -------
Total distributions $(0.478) $(0.454) $ (0.300) $(0.479) $(0.462) $ (0.315)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.610 $ 9.510 $ 9.390 $ 9.370 $ 9.230 $ 9.18
======= ======= ======= ======= ======= =======
TOTAL RETURN (2) 6.25% 6.44% (3.23)% 6.90% 5.89% (5.22)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 1,639 $ 2,465 $ 2,412 $ 2,330 $ 1,971 $ 2,342
Ratio of net expenses to average daily
net assets (1)(3) 1.40% 1.60% 1.75%+ 1.09% 1.26% 1.38%+
Ratio of net expenses to average daily net
assets after custodian fee reduction (1) 1.39% -- -- 1.05% -- --
Ratio of net investment income to
average daily net assets 4.60% 4.73% 4.14%+ 5.03% 5.04% 4.20%+
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of expenses by the Administrator or Investment Adviser. Had such
actions not been taken, net investment income per share and ratios would have
been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE $ 0.364 $ 0.376 $ 0.181 $ 0.380 $ 0.368 $ 0.146
======== ======== ========= ======== ======== =========
RATIOS(As a percentage of average daily net
assets):
Expenses (1)(3) 2.27% 2.21% 2.93%+ 2.06% 2.18% 3.18%+
Expenses after custodian fee reduction (1) 2.26% -- -- 2.02% -- --
Net investment income 3.73% 4.12% 2.96%+ 4.06% 4.12% 2.40%+
</TABLE>
+ Annualized.
(1) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date. Total
return is computed on a non-annualized basis.
(3) The expense ratios for the year ended July 31, 1996 have been adjusted
to reflect a change in reporting requirements. The new reporting
guidelines require each Fund, as well as its corresponding 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 July 31, 1995 have not been adjusted to
reflect this change.
++ The per share amount is not in accord with the net realized and
unrealized gain (loss) for the period because of the timing of sales
of Fund shares and the amount of the per share realized and unrealized
gains and losses at such time.
* For the Traditional Arizona and Traditional Colorado Funds, the
Financial Highlights are for the period from the start of business,
December 13, 1993 and December 10, 1993, respectively, to July 31, 1994.
See notes to financial statements
21
<PAGE> 22
FINANCIAL STATEMENTS (continued)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL
CONNECTICUT FUND MICHIGAN FUND
------------------------------- -------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------- -------------------------------
1996 1995 1994* 1996 1995 1994*
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE beginning of year $10.090 $10.100 $10.000 $ 9.260 $ 9.220 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.550 $ 0.553 $ 0.153 $ 0.454 $ 0.419 $ 0.261
Net realized and unrealized gain (loss) on
investments 0.133 0.012 0.111 0.156 0.063 (0.733)
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.683 $ 0.565 $ 0.264 $ 0.610 $ 0.482 $(0.472)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.550) $(0.553) $(0.153) $(0.460) $(0.419) $(0.261)
In excess of net investment income (0.023) (0.022) (0.011) -- (0.023) (0.047)
------- ------- ------- ------- ------- -------
Total distributions $(0.573) $(0.575) $(0.164) $(0.460) $(0.442) $(0.308)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.200 $10.090 $10.100 $ 9.410 $ 9.260 $ 9.220
======= ======= ======= ======= ======= =======
TOTAL RETURN (2) 6.87% 5.89% 2.66% 6.76% 5.52% (4.88)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 2,013 $ 1,115 $ 163 $ 1,651 $ 4,475 $ 6,366
Ratio of net expenses to average daily
net assets (1)(3) 0.59% 0.51% 0.48%+ 1.44% 1.69% 1.69%+
Ratio of net expenses to average daily net
assets after custodian fee reduction (1) 0.57% -- -- 1.43% -- --
Ratio of net investment income to
average daily net assets 5.35% 5.46% 4.83%+ 4.62% 4.70% 4.18%+
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of expenses by the Administrator or Investment Adviser. Had such
actions not been taken, net investment income (loss) per share and ratios
would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.393 $ 0.249 $(0.045) $ 0.377 $ 0.398 $ 0.235
======== ======== ======== ======== ======== ========
RATIOS (As a percentage of average daily net
assets):
Expenses (1)(3) 2.11% 3.51% 6.73%+ 2.21% 1.92% 2.11%+
Expenses after custodian fee reduction (1) 2.09% -- -- 2.20% -- --
Net investment income (loss) 3.82% 2.46% (1.42)%+ 3.84% 4.47% 3.76%+
</TABLE>
+ Annualized.
(1) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date. Total
return is computed on a non-annualized basis.
(3) The expense ratios for the year ended July 31, 1996 have been adjusted
to reflect a change in reporting requirements. The new reporting
guidelines require each Fund, as well as its corresponding 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 July 31, 1995 have not been adjusted to
reflect this change.
* For the Traditional Connecticut and Traditional Michigan Funds, the
Financial Highlights are for the period from the start of business,
April 19, 1994 and December 7, 1993, respectively, to July 31, 1994.
See notes to financial statements
22
<PAGE> 23
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL
MINNESOTA FUND NEW JERSEY FUND
------------------------------- -------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------- -------------------------------
1996 1995 1994* 1996 1995 1994*
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.300 $ 9.370 $10.000 $ 9.980 $ 9.940 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.474 $ 0.440 $ 0.267 $ 0.579 $ 0.576 $ 0.161
Net realized and unrealized gain (loss)
on investments 0.104 (0.048)++ (0.582) 0.081 0.054 (0.044)++
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.578 $ 0.392 $(0.315) $ 0.660 $ 0.630 $ 0.117
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.478) $(0.440) $(0.267) $(0.579) $(0.576) $(0.161)
In excess of net investment income -- (0.022) (0.048) (0.011) (0.014) (0.016)
------- ------- ------- ------- ------- -------
Total distributions $(0.478) $(0.462) $(0.315) $(0.590) $(0.590) $(0.177)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.400 $ 9.300 $ 9.370 $10.050 $ 9.980 $ 9.940
======= ======= ======= ======= ======= =======
TOTAL RETURN (2) 6.41% 4.45% (3.29)% 6.71% 6.62% 1.19%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 1,583 $ 3,688 $ 4,952 $ 3,488 $ 1,712 $ 296
Ratio of net expenses to average daily
net assets (1)(3) 1.24% 1.47% 1.51%+ 0.60% 0.50% 0.43%+
Ratio of net expenses to average daily net
assets after custodian fee reduction
(1) 1.22% -- -- 0.59% -- --
Ratio of net investment income to average
daily net assets 4.95% 4.84% 4.33%+ 5.68% 5.65% 4.11%+
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of expenses by the Administrator or Investment Adviser. Had such
actions not been taken, net investment income (loss) per share and ratios
would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.394 $ 0.394 $ 0.209 $ 0.474 $ 0.375 $(0.237)
===== ===== ===== ===== ===== =====
RATIOS (As a percentage of average daily
net assets):
Expenses (1)(3) 2.08% 1.98% 2.45%+ 1.63% 2.47% 10.59%+
Expenses after custodian fee reduction (1) 2.06% -- -- 1.62% -- --
Net investment income (loss) 4.10% 4.33% 3.38%+ 4.65% 3.68% (6.05)%+
</TABLE>
+ Annualized.
(1) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date. Total
return is computed on a non-annualized basis.
(3) The expense ratios for the year ended July 31, 1996 have been adjusted
to reflect a change in reporting requirements. The new reporting
guidelines require each Fund, as well as its corresponding 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 July 31, 1995 have not been adjusted to
reflect this change.
++ The per share amount is not in accord with the net realized and
unrealized gain (loss) for the period because of the timing of sales of
Fund shares and the amount of the per share realized and unrealized
gains and losses at such time.
* For the Traditional Minnesota and Traditional New Jersey Funds, the
Financial Highlights are for the period from the start of business,
December 9, 1993 and April 13, 1994, respectively, to July 31, 1994.
See notes to financial statements
23
<PAGE> 24
FINANCIAL STATEMENTS (continued)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL
PENNSYLVANIA FUND TEXAS FUND
------------------------------- -------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------- -------------------------------
1996 1995 1994* 1996 1995 1994*
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.980 $10.050 $10.000 $ 9.190 $ 9.230 $10.000
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.593 $ 0.577 $ 0.044 $ 0.453 $ 0.455 $ 0.267
Net realized and unrealized gain (loss) on
investments 0.122 (0.062)++ 0.104 0.158 (0.008) (0.709)
------- ------- ------- ------- ------- -------
Total income (loss) from operations $ 0.715 $ 0.515 $ 0.148 $ 0.611 $ 0.447 $(0.442)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.585) $(0.577) $(0.044) $(0.453) $(0.455) $(0.267)
In excess of net investment income -- (0.008) (0.054) (0.028) (0.032) (0.061)
------- ------- ------- ------- ------- -------
Total distributions $(0.585) $(0.585) $(0.098) $(0.481) $(0.487) $(0.328)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $10.110 $ 9.980 $10.050 $ 9.320 $ 9.190 $ 9.230
======= ======= ======= ======= ======= =======
TOTAL RETURN (2) 7.28% 5.41% 1.49% 6.85% 5.16% (4.61)%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $ 3,035 $ 1,487 $ 95 $ 371 $ 469 $ 1,147
Ratio of net expenses to average daily
net assets (1)(3) 0.68% 0.46% 1.69%+ 1.06% 1.01% 1.08%+
Ratio of net expenses to average daily
net assets after custodian fee reduction
(1) 0.53% -- -- 1.01% -- --
Ratio of net investment income to
average daily net assets 5.82% 5.58% 2.76%+ 4.79% 5.25% 4.53%+
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of expenses by the Administrator or Investment Adviser. Had such
actions not been taken, net investment income (loss) per share and ratios
would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.453 $ 0.307 $(0.258) $ 0.007 $ 0.254 $ 0.024
======== ======== ======== ======= ======= ========
RATIOS (As a percentage of average daily net
assets):
Expenses (1)(3) 1.93% 3.07% 20.95%+ 5.79% 3.33% 5.20%+
Expenses after custodian fee reduction (1) 1.78% -- -- 5.74% -- --
Net investment income (loss) 4.56% 2.97% (16.50%)+ 0.06% 2.93% 0.41%+
</TABLE>
+ Annualized.
(1) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date. Total
return is computed on a non-annualized basis.
(3) The expense ratios for the year ended July 31, 1996 have been adjusted
to reflect a change in reporting requirements. The new reporting
guidelines require each Fund, as well as its corresponding 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 July 31, 1995 have not been adjusted to
reflect this change.
++ The per share amount is not in accord with the net realized and
unrealized gain (loss) for the period because of the timing of sales
of Fund shares and the amount of the per share realized and unrealized
gains and losses at such time.
* For the Traditional Pennsylvania and Traditional Texas Funds, the
Financial Highlights are for the period from the start of business,
June 1, 1994, and December 8, 1993, respectively, to July 31, 1994.
See notes to financial statements
24
<PAGE> 25
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, eight of the non-diversified funds are
included in these financial statements. They include EV Traditional Arizona
Municipals Fund ("Traditional Arizona Fund"), EV Traditional Colorado Municipals
Fund, ("Traditional Colorado Fund"), EV Traditional Connecticut Municipals Fund
("Traditional Connecticut Fund"), EV Traditional Michigan Municipals Fund
("Traditional Michigan Fund"), EV Traditional Minnesota Municipals Fund
("Traditional Minnesota Fund"), EV Traditional New Jersey Municipals Fund
("Traditional New Jersey Fund"), EV Traditional Pennsylvania Municipals Fund
("Traditional Pennsylvania Fund") and EV Traditional Texas Municipals Fund
("Traditional Texas 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 Traditional Arizona Fund invests its assets in the
Arizona Municipals Portfolio, the Traditional Colorado Fund invests its assets
in the Colorado Municipals Portfolio, the Traditional Connecticut Fund invests
its assets in the Connecticut Municipals Portfolio, the Traditional Michigan
Fund invests its assets in the Michigan Municipals Portfolio, the Traditional
Minnesota Fund invests its assets in the Minnesota Municipals Portfolio, the
Traditional New Jersey Fund invests its assets in the New Jersey Municipals
Portfolio, the Traditional Pennsylvania Fund invests its assets in the
Pennsylvania Municipals Portfolio and the Traditional Texas Fund invests its
assets in the Texas 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 (1.2%, 5.1%, 1.1%, 0.9%, 2.0%, 0.9%, 0.7% and 1.4%
at July 31, 1996 for the Traditional Arizona Fund, Traditional Colorado Fund,
Traditional Connecticut Fund, Traditional Michigan Fund, Traditional Minnesota
Fund, Traditional New Jersey Fund, Traditional Pennsylvania Fund and Traditional
Texas Fund, respectively). The performance of each Fund is directly affected by
the performance of its corresponding Portfolio. The financial statements of each
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with each Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATION--Valuation of securities by the Portfolios is discussed
in Note 1 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME--Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with generally
accepted accounting principles.
C. FEDERAL TAXES--Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At July 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. The
amounts and expiration dates of the capital loss carryovers are as follows:
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRES
- -------------------------------- --------- --------------
<S> <C> <C>
Traditional Arizona Fund $ 103,720 July 31, 2004
6,850 July 31, 2003
22,324 July 31, 2002
Traditional Colorado Fund 118,869 July 31, 2004
10,898 July 31, 2003
18,440 July 31, 2002
Traditional Connecticut Fund 7,415 July 31, 2004
135 July 31, 2002
Traditional Michigan Fund 125,170 July 31, 2004
36,368 July 31, 2003
83,846 July 31, 2002
Traditional Minnesota Fund 200,221 July 31, 2004
40,089 July 31, 2003
22,023 July 31, 2002
Traditional New Jersey Fund 24,264 July 31, 2004
92 July 31, 2002
Traditional Pennsylvania Fund 2,424 July 31, 2004
Traditional Texas Fund 44,887 July 31, 2004
11,202 July 31, 2002
</TABLE>
Additionally, at July 31, 1996, net capital losses of $1,725, $5,405, and $2,900
for the Traditional Colorado Fund, Traditional New Jersey Fund and Traditional
Texas Fund, respectively, attributable to security transactions incurred after
October 31, 1995 are treated as arising on the first day of each Fund's 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
25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
income tax purposes because each Fund and Portfolio intend to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Funds to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
D. DEFERRED ORGANIZATION EXPENSES--Costs incurred by a Fund in connection with
its organization, including registration costs, are being amortized on the
straight-line basis over five years.
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 the Fund's custodian fees are reported as a reduction of expenses in
the Statement 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.
- --------------------------------------------------------------------------------
(2) FUND NAME CHANGES
Effective February 1, 1996, the EV Classic Arizona Municipals Fund, EV Classic
Colorado Municipals Fund, EV Classic Michigan Municipals Fund, EV Classic
Minnesota Municipals Fund and EV Classic Texas Municipals Fund changed their
respective names to EV Traditional Arizona Municipals Fund, EV Traditional
Colorado Municipals Fund, EV Traditional Michigan Municipals Fund, EV
Traditional Minnesota Municipals Fund and EV Traditional Texas Municipals Fund.
In addition, each Fund discontinued the payment of sales commissions and
distribution fees to the Principal Underwriter pursuant to their respective
Distribution Plan (see Notes 6 and 8). The Funds have adopted new service plans
(see Note 7) which allow for the quarterly payment of service fees to the
Principal Underwriter and authorized firms. Purchases of Fund shares on or after
February 1, 1996 are subject to a Maximum Initial Sales Charge of 3.75% on
amounts up to $50,000 and at declining rates on purchases in excess of such
amount.
26
<PAGE> 27
- --------------------------------------------------------------------------------
(3) DISTRIBUTIONS TO SHAREHOLDERS
The net income of a Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. 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 shareholder, in cash.
The Funds distinguish between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over distributions for financial 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 July 31, 1996, the following reclassifications were made
due to permanent differences between book and tax accounting for distribution
costs, and certain distributions related to capital gains:
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL
PENNSYLVANIA TEXAS
INCREASE/DECREASE FUND FUND
- ---------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Accumulated net realized loss on investment and financial futures
transactions $ 43 $ 355
Accumulated distributions in excess of net investment income
Paid-in capital (43) (355)
</TABLE>
Net investment income, net realized gains and net assets were not affected by
these reclassifications.
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.
- --------------------------------------------------------------------------------
(4) 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>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA FUND COLORADO FUND CONNECTICUT FUND MICHIGAN FUND
--------------------- --------------------- --------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
--------------------- --------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 42,083 284,699 87,887 131,906 100,126 120,607 23,719 91,974
Issued to shareholders
electing
to receive payments of
distributions in Fund shares 6,766 11,797 8,923 9,251 2,672 1,266 11,018 24,410
Redemptions (137,615) (294,142) (61,643) (182,871) (16,081) (27,499) (342,589) (323,457)
-------- ------- ------- ------- ------- -------- -------- --------
Net increase (decrease) (88,766) 2,354 35,167 (41,714) 86,717 94,374 (307,852) (207,073)
======== ======= ======= ======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA FUND NEW JERSEY FUND PENNSYLVANIA FUND TEXAS FUND
--------------------- --------------------- --------------------- ---------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
--------------------- --------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 52,427 154,778 210,185 176,303 234,880 161,529 12,298 12,839
Issued to shareholders
electing to receive payment
of distributions in Fund
shares 7,328 8,048 6,541 1,938 5,953 1,318 1,993 2,544
Redemptions (287,853) (294,858) (41,325) (36,535) (89,658) (23,354) (25,461) (88,591)
-------- ------- ------- ------- ------- -------- -------- --------
Net increase (decrease) (228,098) (132,032) 175,401 141,706 151,175 139,493 (11,170) (73,208)
======== ======= ======= ======= ======= ======== ======== ========
</TABLE>
27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(5) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 2 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Funds for the year
ended July 31, 1996, $19,116, $20,152, $24,364, $23,512, $24,485, $25,726,
$27,368 and $20,325 of expenses related to the operation of the Traditional
Arizona Fund, Traditional Colorado Fund, Traditional Connecticut Fund,
Traditional Michigan Fund, Traditional Minnesota Fund, Traditional New Jersey
Fund, Traditional Pennsylvania Fund and Traditional Texas Fund, respectively,
were allocated to EVM.
Certain of the officers and trustees of the Funds and Portfolios are officers
and directors/trustees of the above organizations (Note 6). 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.
- --------------------------------------------------------------------------------
(6) DISTRIBUTION PLAN
Prior to February 1, 1996, Traditional Arizona Fund, Traditional Colorado Fund,
Traditional Michigan Fund, Traditional Minnesota Fund and Traditional Texas Fund
had adopted a distribution plan (the Plans) pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The Plans required the Funds to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365 of 0.75% of each Funds' daily net assets, for providing ongoing
distribution services and facilities to the respective Fund. A Fund would
automatically discontinue payments to EVD during any period in which there were
no outstanding Uncovered Distribution Charges, which were equivalent to the sum
of (i) 6.25% 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 (see Note
8) and amounts theretofore paid to EVD. The amount payable to EVD with respect
to each day was accrued on such day as a liability of each Fund and,
accordingly, reduced the Fund's net assets. For the period from August 1, 1995
to January 31, 1996, Traditional Arizona Fund, Traditional Colorado Fund,
Traditional Michigan Fund, Traditional Minnesota Fund and Traditional Texas
Fund, paid $9,253, $7,018, $15,711, $13,097 and $1,924, respectively, to EVD
representing 0.75% (annualized) of average daily net assets. At July 31, 1996,
the amount of Uncovered Distribution Charges of EVD calculated under the Plans
for Traditional Arizona Fund, Traditional Colorado Fund, Traditional Michigan
Fund, Traditional Minnesota Fund and Traditional Texas Fund were approximately
$436,000, $334,000, $547,000, $446,000, and $87,000, respectively.
In addition, the Plans permitted the Funds to make monthly payments of service
fees to the Principal Underwriter, in amounts which did not exceed 0.25% of each
Fund's average daily net assets for any fiscal year. The Trustees had initially
implemented the Plans by authorizing the Funds to make monthly service fee
payments to the Principal Underwriter in amounts not exceeding 0.20% of each
Fund's average daily net assets for any fiscal year. For the period from August
1, 1995 to January 31, 1996, Traditional Arizona Fund, Traditional Colorado
Fund, Traditional Michigan Fund, Traditional Minnesota Fund, and Traditional
Texas Fund paid service fees to EVD in the amount of $2,468, $1,872, $4,190,
$3,493, and $513, respectively. During the first year after a purchase of Fund
shares, EVD retained the service fee as reimbursement for the service fee
payment made to the Authorized Firm at the time of sale. Thereafter, EVD was
expected to make monthly service fee payments to Authorized Firms equal to 0.20%
per annum of the Fund's average daily net assets based on the value of the
Fund's shares sold by such authorized firm and remaining outstanding for at
least one year. Service fee payments were made for personal services and/or
maintenance of shareholder accounts. Service fees paid to EVD and Authorized
Firms were separate and distinct from the sales commissions and distribution
fees payable by a Fund to EVD, and as such were not subject to automatic
discontinuance when there were no outstanding Uncovered Distribution Charges of
EVD.
Certain of the officers and Trustees of the Funds are officers or directors of
EVD.
28
<PAGE> 29
- --------------------------------------------------------------------------------
(7) SERVICE PLAN
Each Fund has adopted a service plan (the Plans) designed to meet the service
fee requirements of the sales charge rule of The National Association of
Securities Dealers, Inc. The Plans provide that each Fund may make service fee
payments to EVD, Authorized Firms or 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 each Plan by authorizing the Fund to make quarterly
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not exceeding 0.20% of each Fund's average daily net assets for any
fiscal year which is attributable to shares of a Fund sold by such persons and
remaining outstanding for at least one year. Service fee payments are made for
personal services and/or the maintenance of shareholder accounts. For the year
ended July 31, 1996, the Traditional Connecticut Fund, Traditional New Jersey
Fund and Traditional Pennsylvania Fund paid or accrued service fees of $909,
$1,126 and $1,033, respectively. For the period from February 1, 1996, to July
31, 1996, the Traditional Arizona Fund, Traditional Colorado Fund, Traditional
Michigan Fund, Traditional Minnesota Fund and Traditional Texas Fund paid or
accrued services fees of $1,939, $2,343, $1,938, $1,868 and $367, respectively.
Certain of the officers and Trustees of the Funds are officers and directors of
EVD.
- --------------------------------------------------------------------------------
(8) CONTINGENT DEFERRED SALES CHARGES
For shares of the Traditional Arizona Fund, Traditional Colorado Fund,
Traditional Michigan Fund, Traditional Minnesota Fund and Traditional Texas Fund
purchased between January 30, 1995 and January 31, 1996, a contingent deferred
sales charge (CDSC) of 1% is imposed on any redemption of Fund shares made
within one year of purchase. 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. No CDSC is
levied on shares which have been sold to EVD or its affiliates or to their
respective employees or clients. CDSC charges are paid to EVD to reduce the
amount of Uncovered Distribution Charges calculated under the Funds'
Distribution Plans (see Note 6). CDSC received when no Uncovered Distribution
Charges exist will be credited to the Funds. For the year ended July 31, 1996,
EVD received approximately $140, $70, $220, $275 and $20 of CDSC paid by
shareholders of Traditional Arizona Fund, Traditional Colorado Fund, Traditional
Michigan Fund, Traditional Minnesota Fund and Traditional Texas Fund,
respectively.
- --------------------------------------------------------------------------------
(9) INVESTMENT TRANSACTIONS
Increases and decreases in each Fund's investment in its corresponding Portfolio
for the year ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
ARIZONA COLORADO CONNECTICUT MICHIGAN
FUND FUND FUND FUND
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Increases $ 438,640 $862,888 $1,050,401 $ 304,600
Decreases 1,413,730 627,166 245,306 3,509,621
</TABLE>
<TABLE>
<CAPTION>
TRADITIONAL TRADITIONAL TRADITIONAL TRADITIONAL
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
FUND FUND FUND FUND
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Increases $ 533,182 $2,155,779 $2,373,836 $ 143,210
Decreases 2,889,877 519,881 1,007,296 277,631
</TABLE>
29
<PAGE> 30
Independent Auditor's Report
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF EATON VANCE MUNICIPALS TRUST:
We have audited the accompanying statements of assets and liabilities of EV
Traditional Arizona Municipals Fund, EV Traditional Colorado Municipals Fund, EV
Traditional Connecticut Municipals Fund, EV Traditional Michigan Municipals
Fund, EV Traditional Minnesota Municipals Fund, EV Traditional New Jersey
Municipals Fund, EV Traditional Pennsylvania Municipals Fund, and EV Traditional
Texas Municipals Fund (the Funds) (certain of the series of Eaton Vance
Municipals Trust) as of July 31, 1996, the related statements of operations for
the year then ended, and the statements of changes in net assets for the years
ended July 31, 1996 and 1995 and the financial highlights for the years ended
July 31, 1996 and 1995 and for the period from the start of business to July 31,
1994. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
aforementioned funds of Eaton Vance Municipals Trust at July 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
AUGUST 23, 1996
30
<PAGE> 31
Arizona Municipals Portfolio
Portfolio of Investments -- July 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 - 1.3%
NR NR $1,800 Arizona Health Facilities
Authority, Mesa Project,
7.625%, 1/1/26 $ 1,631,394
-------------
EDUCATION - 6.2%
A1 AA $1,250 Arizona Board of Regents,
University of Arizona,
6.25%, 6/1/11 $ 1,299,163
NR NR 2,000 Arizona Educational Loan
Marketing Corporation,
(AMT) 6.30%, 12/1/08 1,972,860
NR NR 2,000 Arizona Educational Loan
Marketing Corporation,
(AMT) 6.25%, 6/1/06 2,020,220
NR AAA 1,000 City of Glendale,
Thunderbird Graduate
School, CLEE, 7.125%,
7/1/20 1,163,090
A NR 1,500 Student Loan Acquisition
Authority of Arizona,
(AMT) 7.625%, 5/1/10 (4) 1,628,010
-------------
$ 8,083,343
-------------
ESCROWED - 6.3%
Aaa AA $1,000 Arizona Transportation
Board Highway, 6.50%,
7/1/11 $ 1,104,320
Aaa AAA 7,500 Maricopa County, Single
Family Mortgage, 0%,
2/1/16 2,260,275
NR AA 2,500 City of Phoenix, Street &
Highway User, 6.25%,
7/1/11 2,649,600
Aaa AAA 5,000 City of Phoenix, IDA,
Single Family Housing, 0%,
12/1/14 1,648,050
NR NR 500 City of Scottsdale,
Westminster Village,
Multifamily Housing,
10.00%, 6/1/17 539,220
-------------
$ 8,201,465
-------------
GENERAL OBLIGATIONS - 11.4%
Aa AA $1,300 Maricopa County,
Scottsdale Unified School
District No. 48, 4.60%,
7/1/11 $ 1,162,421
Aa AA+ 1,500 City of Phoenix,
6.375%, 7/1/13 1,581,165
Aa AA+ 3,000 City of Phoenix,
5.10%, 7/1/13 2,846,670
NR A 2,000 City of Phoenix, Tatum
Ranch Community,
6.875%, 7/1/16 (4) 2,115,160
Aa AA+ 1,000 City of Tempe,
5.25%, 7/1/15 939,470
Baa1 A 1,850 Commonwealth of Puerto
Rico, 5.40%, 7/1/25 1,710,270
Baa1 A 4,000 Commonwealth of Puerto
Rico, Aqueduct and Sewer
Authority, 5.0%, 7/1/19 3,496,200
NR NR 1,000 Virgin Islands 7.25%
10/1/18 1,057,130
-------------
$ 14,908,486
-------------
<CAPTION>
RATINGS UNAUDITED
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - 3.6%
NR BBB $1,130 Arizona Health Facilities
Authority, Phoenix
Memorial Hospital, 8.125%,
6/1/12 (4) $ 1,223,812
NR BBB 1,250 Arizona Health Facilities
Authority, Phoenix
Memorial Hospital, 8.20%,
6/1/21 1,354,913
Baa BBB- 1,000 Maricopa County, Sun
Health Corporation,
8.125%, 4/1/12 1,092,660
NR NR 915 City of Winslow, Winslow
Memorial Hospital Project,
9.50%, 6/1/22 1,004,075
-------------
$ 4,675,460
-------------
HOUSING - 7.0%
NR A $2,000 Maricopa County, Laguna
Point Apartments,
Multifamily Housing,
6.75%, 7/1/09 (4) $ 2,047,660
NR A 2,250 Maricopa County,
Industrial Development
Authority, Multifamily
Housing, 6.625%, 7/1/26 2,254,386
NR AAA 2,775 City of Phoenix, Chris
Ridge Village Project, FHA
Insured Mortgage Loan,
6.80%, 11/1/25 2,860,942
NR AA 1,000 City of Phoenix, Woodstone
and Silver Springs
Apartments, Multifamily
Housing, (Asset Guaranty),
6.25%, 4/1/23 1,013,890
NR AAA 1,000 City of Tempe, Multifamily
Housing, Quadrangle
Village Apartments, FHA
Insured Mortgage Loan,
6.25%, 6/1/26 1,014,090
-------------
$ 9,190,968
-------------
INDUSTRIAL DEVELOPMENT
REVENUE/IDB - 5.0%
A1 NR $1,000 City of Casa Grande,
Pollution Control,
Frito-Lay Inc., 6.60%,
12/1/10 $ 1,073,250
A2 A 3,500 Greenlee County, Pollution
Control, Phelps Dodge
Corporation, 5.45%, 6/1/09 3,433,290
Baa3 BB+ 2,000 Commonwealth of Puerto
Rico, Port Authority,
American Airlines, 6.25%,
6/1/26 1,999,760
-------------
$ 6,506,300
-------------
</TABLE>
31
<PAGE> 32
ARIZONA MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 GENERAL OBLIGATION
-8.6%
Aaa AAA $1,000 Maricopa County, Alhambra
Elementary School District
No. 68, (AMBAC) 5.125%,
7/1/13 $ 951,610
Aaa AAA 1,000 Maricopa County, Alhambra
Elementary School District
No. 68, (AMBAC) 5.625%
7/1/13 1,013,580
Aaa AAA 1,000 Maricopa County, Chandler
Unified School District
No. 80, (FGIC) 6.40%,
7/1/10 1,053,760
Aaa AAA 1,000 Maricopa County, Paradise
Valley Unified School
District No. 69, (MBIA),
5.3%, 7/1/11 967,920
Aaa AAA 1,000 Maricopa County, Peoria
Unified School District
No. 11 , (MBIA) 6.40%,
7/1/10 1,053,760
Aaa AAA 1,000 Maricopa County, Tolleson
High School District, No.
214, (FGIC) 5.00%, 7/1/13 938,030
Aaa AAA 1,750 Pima County, School
District No. 1, Tucson
Project, (FGIC) 5.875%,
7/1/14 1,771,490
Aaa AAA 1,000 Commonwealth of Puerto
Rico, Variable (FSA)
7/1/20 (1) 1,002,200
Aaa AAA 1,500 Commonwealth of Puerto
Rico, Variable (AMBAC)
7/1/15 (1) 1,517,400
Aaa AAA 1,000 Commonwealth of Puerto
Rico, Variable (FSA)
7/1/22 (1) 1,024,030
-------------
$ 11,293,780
-------------
INSURED HOSPITALS - 13.3%
Aaa AAA $2,000 Maricopa County, Hospital
District No. 1, (FGIC)
6.125%, 6/1/15 (2) $ 2,057,000
Aaa AAA 2,000 Maricopa County, Samaritan
Health, (MBIA) 7.0%,
12/1/16 2,318,300
Aaa AAA 2,000 Mohave County, Kingman
Regional Medical Center,
(FGIC) 6.50%, 6/1/15 2,100,640
Aaa AAA 1,500 Pima County, Tucson
Medical Center, (MBIA)
6.375%, 4/1/12 1,570,485
Aaa AAA 3,500 Pima County, Tucson
Medical Center, (MBIA)
5.0%, 4/1/15 3,220,525
<CAPTION>
RATINGS UNAUDITED
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA 1,000 Pima County, Carondelet
Health Care Corporation,
(MBIA) 5.25%, 7/1/11 960,000
Aaa AAA 1,000 Pima County, Carondelet
Health Care Corporation,
(MBIA) 5.25%, 7/1/12 962,390
Aaa AAA 1,500 City of Scottsdale,
Industrial Development
Authority Hospital,
(AMBAC) 6.125%,
9/1/17 (3) 1,445,835
Aaa AAA 2,000 University of Arizona
Medical Center
Corporation, (MBIA) 5.0%
7/1/13 1,853,340
Aaa AAA 1,000 University of Arizona
Medical Center
Corporation, (MBIA) 5.0%
7/1/21 891,600
-------------
$ 17,380,115
-------------
INSURED UTILITIES - 4.2%
Aaa AAA $1,500 Navajo County, Pollution
Control, Arizona Public
Service Co., (AMBAC)
5.50%, 8/15/28 $ 1,416,120
Aaa AAA 2,920 Pima County, Irvington
Power Project, (FSA)
7.25%, 7/15/10 (2) 3,167,120
Aaa AAA 1,000 Arizona State Power
Authority, Hoover Uprating
Project, (MBIA) 5.25%,
10/1/17 928,780
-------------
$ 5,512,020
-------------
INSURED SPECIAL TAX - 1.6%
Aaa AAA $1,750 City of Phoenix, Civic
Improvement Excise Tax,
(MBIA) 6.60%, 7/1/08 $ 1,908,900
-------------
INSURED WATER & SEWER - 1.6%
Aaa AAA $1,000 City of Chandler, Water
and Sewer, (FGIC) 6.25%,
7/1/13 $ 1,047,490
Aaa AAA 1,200 City of Phoenix, Civic
Improvement Wastewater
Systems, (MBIA) 5.0%,
7/1/18 1,081,716
-------------
$ 2,129,206
-------------
SPECIAL TAX - 0.7%
Baa1 A $1,000 Puerto Rico Highway and
Transportation Authority,
5.25%, 7/1/20 $ 908,890
-------------
TRANSPORTATION - 3.8%
Aa AA $1,000 State of Arizona,
Transportation Board &
Highway, 5.00%, 7/1/10 $ 962,120
Aa AA 1,000 State of Arizona,
Transportation Board &
Highway, 5.10%, 7/1/11 950,820
</TABLE>
32
<PAGE> 33
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS UNAUDITED
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
NR BBB 3,000 Guam Airport Authority,
(AMT) 6.70%, 10/1/23 3,046,740
-------------
$ 4,959,680
-------------
UTILITIES - 16.7%
Ba2 BB $2,500 Maricopa County, Pollution
Control, Public Service
Company of New Mexico,
Palo Verde Project,
6.375%, 8/15/23 $ 2,366,350
Baa1 BBB 5,300 Navajo County, Pollution
Control, Arizona Public
Service Co., 5.875%,
8/15/28 5,082,647
A A+ 1,000 Puerto Rico Telephone
Authority, Variable 1/1/20
(1) 1,014,170
A1 AA- 1,000 Central Arizona Water
Conservation District,
Central Arizona Project,
5.50%, 11/1/09 1,008,330
NR BBB 1,200 Guam Power Authority,
6.30%, 10/1/12 1,197,456
NR BBB 1,250 Guam Power Authority,
6.30%, 10/1/22 1,230,975
Baa1 A- 550 Puerto Rico Electric Power
Authority, 7.00%, 7/1/07 587,747
Baa1 A- 370 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 396,529
Aa AA 5,500 Salt River Project
Agricultural Improvement
and Power District, 5.25%,
1/1/25 5,198,270
Aa AA 1,000 Salt River Project
Agricultural Improvement
and Power District, 6.25%,
1/1/27 1,030,950
Aa AA 3,000 Salt River Project
Agricultural Improvement
and Power District, 5.25%,
1/1/19 2,773,140
-------------
$ 21,886,564
-------------
WATER & SEWER - 8.8%
Aa AA+ $2,000 State of Arizona,
Wastewater Management
Authority, 6.80%, 7/1/11
(2) $ 2,175,400
<CAPTION>
RATINGS UNAUDITED
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
A1 A 1,100 City of Phoenix, Water
System, 5.00%, 7/1/18 974,149
A1 A 5,000 City of Phoenix, Water
System, 4.75%, 7/1/23 4,193,650
Aa AA- 2,100 City of Phoenix,
Improvement Junior Lien
Water, 5.6%, 7/1/18 2,071,188
A1 A+ 1,000 City of Tucson, Water
System, 6.50%, 7/1/16 1,055,570
A1 A+ 1,000 City of Tucson, Water
System, 5.50%, 7/1/10 998,010
-------------
$ 11,467,967
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $125,151,785) $ 130,644,538
===============
</TABLE>
(1) The above designated securities have been issued as inverse floater bonds.
(2) Security has been segregated to cover margin requirements on open financial
futures contracts.
(3) When-issued security.
(4) The above designated 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 primarily invests in debt securities issued by Arizona
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1996, 34.7% 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 institution ranged from 4.0% to 13.6% of total investments.
See notes to financial statements
33
<PAGE> 34
Colorado Municipals Portfolio
Portfolio of Investments -- July 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 99.9%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
ESCROWED - 4.3%
Aaa AAA $ 4,000 Colorado Health Facilities
Authority, Liberty Heights
Project, (FSA) 0%, 7/15/24 $ 561,640
Aaa NR 8,500 Dawson Ridge County,
Metropolitan District, 0%,
10/1/22 1,353,285
-------------
$ 1,914,925
-------------
GENERAL OBLIGATIONS - 4.6%
A1 AA $ 1,000 Boulder and Gilpin
Counties, Boulder Valley
School District, 6.30%,
12/1/13 $ 1,055,000
Baa1 A 1,000 Commonwealth of Puerto
Rico, Public Building
Authority, 5.75%, 7/1/15 972,990
-------------
$ 2,027,990
-------------
HOSPITALS - 16.8%
Baa BBB $ 2,050 Colorado Health Facilities
Authority, Rocky Mountain
Adventist Healthcare,
6.625%, 2/1/13 $ 2,066,481
NR NR 900 Colorado Health Facilities
Authority, Cleo Wallace
Center, 7.00%, 8/1/15 904,662
NR BBB- 650 Colorado Health Facilities
Authority, National Jewish
Center, 6.875%, 2/15/12 649,058
NR BBB 2,000 Colorado Health Facilities
Authority, Vail Valley
Medical Center, 6.60%,
1/15/20 2,005,860
Baa1 NR 2,000 Colorado Health Facilities
Authority, Parkview
Memorial Hospital, 6.125%,
9/1/25 1,843,940
-------------
$ 7,470,001
-------------
HOUSING - 15.4%
Aa AA $ 750 Colorado Housing and
Finance Authority, Multi-
Family Mortgage Revenue,
6.40%, 10/1/27 $ 751,748
NR AAA 1,000 Denver County,
Multi-family Housing,
Lofts Project, 6.15%,
12/1/16 1,002,310
NR NR 350 Lake Creek Affordable
Housing Corporation,
Multi-family Housing,
8.00%, 12/1/23 360,588
NR AAA 1,000 City of Lakewood, Multi-
Family Housing FHA Insured
Mortgage Loan, (AMT),
6.65%, 10/1/25 1,026,820
Aa NR 1,785 Colorado Housing and
Finance Authority, Single
Family Access Program,
7.90%, 12/1/24 2,004,536
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa NR 905 Colorado Housing and
Finance Authority, Single
Family Access Program,
8.00%, 12/1/24 1,022,062
Aa NR 595 Colorado Housing and
Finance Authority, Single
Family Housing, (AMT),
7.65%, 12/1/25 666,733
-------------
$ 6,834,797
-------------
INDUSTRIAL DEVELOPMENT
REVENUE - 6.4%
A2 NR $ 1,750 Puerto Rico Pollution
Control, American Home
Products Corporation,
5.10%, 12/1/18 $ 1,575,350
Baa3 BB+ 1,250 Puerto Rico Port
Authority, American
Airlines, 6.25%, 6/1/26 1,249,850
-------------
$ 2,825,200
-------------
INSURED EDUCATION - 3.8%
Aaa AAA $ 750 Auraria County, Higher
Education Center, (AMBAC),
5.30%, 5/1/21 $ 697,268
Aaa AAA 1,000 Board of Trustees of the
State Colleges in
Colorado, Adams State
College of Colorado
Project, (MBIA) 5.70%,
5/15/14 996,580
-------------
$ 1,693,848
-------------
INSURED GENERAL
OBLIGATIONS - 9.9%
Aaa AAA $ 1,100 Highlands Ranch
Metropolitan District No.
2, Douglas County, (CGIC),
6.50%, 6/15/12 (2) $ 1,195,788
Aaa AAA 1,000 Douglas and Elbert
Counties, Douglas County
School District, (MBIA),
6.40%, 12/15/11 1,065,830
Aaa AAA 1,750 Eagle, Garfield & Routt
Counties, School District
No. RE 50J, (FGIC), 6.30%,
12/1/12 1,857,555
Aaa AAA 500 Summit County, School
District No. RE 1, (FGIC)
0%, 12/1/06 292,265
-------------
$ 4,411,438
-------------
INSURED HOSPITAL - 2.3%
Aaa AAA $ 1,000 Colorado Health Facilities
Authority, Boulder
Community Hospital,
(MBIA), 5.875% 10/1/23 $ 999,230
-------------
</TABLE>
34
<PAGE> 35
- --------------------------------------------------------------------------------
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 HOUSING - 2.4%
Aaa AAA $ 1,000 City of Thornton, SCA
Realty MFMR, (FSA) 7.10%,
1/1/30 $ 1,085,260
-------------
INSURED UTILITIES - 1.8%
Aaa AAA $ 300 Commonwealth of Puerto
Rico, Electric Power
Authority, (FSA),
Variable, 7/1/03 (1) $ 327,720
Aaa AAA 500 Commonwealth of Puerto
Rico, Telephone Authority,
(MBIA), Variable, 1/16/15
(1) 464,795
-------------
$ 792,515
-------------
INSURED SPECIAL TAX - 2.3%
Aaa AAA $ 1,000 City of Broomfield Sales
and Use Tax, (AMBAC)
6.30%, 12/1/14 $ 1,039,430
-------------
INSURED TRANSPORTATION - 3.3%
Aaa AAA $ 1,500 City and County of Denver,
Denver International
Airport, (AMT) (MBIA),
5.75%, 11/15/15 $ 1,467,375
-------------
INSURED WATER & SEWER - 2.0%
Aaa AAA $ 1,000 Municipal Subdistrict,
Northern Colorado Water
Conservancy District,
(AMBAC) 5.00%, 12/1/17 $ 900,480
-------------
SPECIAL TAX - 5.6%
Baa1 A $ 2,750 Puerto Rico Highway and
Transportation Authority,
5.25%, 7/1/20 $ 2,499,448
-------------
TRANSPORTATION - 14.1%
Baa3 BB $ 2,000 City and County of Denver,
Colorado Special
Facilities Airport System,
United Airlines, (AMT)
6.875%, 10/1/32 $ 2,035,280
Baa BBB 750 City and County of Denver,
Colorado Airport System,
(AMT) 7.00%, 11/15/25 765,750
Baa BBB 1,500 City and County of Denver,
Colorado Airport System,
(AMT) 6.75%, 11/15/22 1,526,385
Baa BBB 500 City and County of Denver,
Colorado Airport System,
(AMT) 7.50%, 11/15/23 544,155
NR NR 500 Eagle County, Eagle County
Airport Terminal Project,
7.50%, 5/1/21 511,750
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
NR BBB 750 Guam Airport Authority,
(AMT) 6.60%, 10/1/10 759,150
NR BBB 100 Guam Airport Authority,
(AMT) 6.70%, 10/1/23 101,558
-------------
$ 6,244,028
-------------
UTILITIES - 4.9%
NR BBB $ 500 Guam Power Authority,
6.625%, 10/1/14 $ 511,245
Aa A+ 1,750 Platte River Power
Authority, 5.50%, 6/1/18 1,668,660
-------------
$ 2,179,905
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $42,712,754) $ 44,385,870
-------------
</TABLE>
- ----------------------------------------------------------------
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS - 0.1%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
89 30 year-U.S. Treasury
Bond, American, expiration
9/19/96, strike price
$106.00, (identified cost,
$64,553) $ 29,203
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST,
$42,777,307) $ 44,415,073
=============
</TABLE>
(1) The above designated securities have been issued as inverse floater bonds.
(2) The above designated securities have 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 Colorado
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 July 31, 1996, 25.0% 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 institution ranged from 2.7% to 11.2% of total investments.
See notes to financial statements
35
<PAGE> 36
Connecticut Municipals Portfolio
Portfolio of Investments - July 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>
AIRPORTS - 1.1%
NR BBB $ 2,000 Guam Airport Authority
Revenue Bonds, (AMT),
6.70%, 10/1/23 $ 2,031,160
-------------
EDUCATION - 8.2%
Baa BBB $ 1,000 Connecticut Health and
Educational Facilities
Authority, (HEFA)
University of Hartford,
6.75%, 7/1/12 $ 1,009,650
Baa BBB 5,500 Connecticut HEFA,
University of Hartford,
6.80%, 7/1/22 5,526,125
NR BBB- 4,775 Connecticut HEFA,
Quinnipiac College, 6.00%,
7/1/23 4,450,157
NR BBB- 1,000 Connecticut HEFA, Sacred
Heart University, 5.80%,
7/1/23 888,400
Aaa AAA 3,400 Connecticut HEFA, Yale
University, Variable,
6/10/30 (1) 3,404,182
-------------
$ 15,278,514
-------------
ESCROWED/PREREFUNDED - 5.4%
NR AA- $ 650 State of Connecticut
General Obligations Bonds,
6.875%, 7/15/10 $ 714,122
NR AAA 800 Connecticut Special Tax
Obligation Bonds,
Transportation
Infrastructure Purposes,
6.75%, 6/1/11 890,752
Aaa AA 645 Connecticut Special Tax
Obligation Bonds,
Transportation
Infrastructure Purposes,
6.50%, 7/1/09 695,104
A1 NR 300 Amity RSD No. 5 Bonds,
6.80%, 6/15/08 320,307
NR A- 1,630 City of Stratford, 7.30%,
3/1/12 1,830,262
NR AAA 1,000 Puerto Rico Industrial
Medical & Environmental
Pollution Control
Facilities, Dr. Pila
Hospital, 7.85%, 8/1/28 1,091,780
Baa A 1,000 Connecticut HEFA, Sacred
Heart University, 6.80%,
7/1/12 1,115,200
A AA- 2,000 City of Bridgeport,
6.125%, 3/1/05 2,115,760
Aaa AAA 1,200 Connecticut HEFA, Yale --
New Haven Hospital (MBIA),
7.10%, 7/1/25 1,289,052
-------------
$ 10,062,339
-------------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
GENERAL OBLIGATIONS - 3.2%
Aa AA- $ 1,750 State of Connecticut,
Capital Appreciation
Bonds, 0%, 11/1/09 $ 853,248
A1 AA- 1,475 Connecticut Development
Authority, Special
Obligation, 5.55%,
12/15/15 1,422,343
Aa AA- 500 State of Connecticut,
5.50%, 3/15/11 501,460
Aa AA 1,270 City of Danbury, 4.50%,
2/1/14 1,095,083
Aa1 NR 650 City of Farmington, 5.70%,
1/15/11 670,020
NR BBB 500 Government of Guam, 5.40%,
11/15/18 438,335
NR NR 1,000 Virgin Islands PFA Revenue
Bonds, 7.25%, 10/1/18 1,057,130
-------------
$ 6,037,619
-------------
HEALTH CARE (NON-HOSPITAL
PROGRAM) - 12.5%
A1 AA- $ 655 Connecticut HEFA, (St.
Camillus), 6.25%,
11/1/18 $ 667,314
A1 AA- 3,250 Connecticut HEFA, St.
Joseph's Manor, 6.25%,
11/1/16 3,323,580
A1 AA- 1,305 Connecticut HEFA, Sharon
Healthcare, 6.25%, 11/1/14 1,344,633
A1 AA- 720 Connecticut HEFA, Highland
View, 7.00%, 11/1/07 798,890
A1 AA- 335 Connecticut HEFA,
Wadsworth Glen, AMT 7.00%,
11/1/07 371,706
A1 AA- 2,000 Connecticut HEFA,
Wadsworth Glen, AMT 7.50%,
11/1/16 2,284,600
A1 AA- 3,000 Connecticut HEFA, Windsor,
7.125%, 11/1/14 3,342,660
A1 AA- 500 Connecticut HEFA, Windsor,
7.125%, 11/1/24 557,110
NR NR 1,240 Connecticut Dev. Auth.,
Baptist Homes, 9.00%,
9/1/22 1,351,464
A2 NR 9,000 Connecticut Development
Authority Health Care
Bonds, Duncaster, 6.75%,
9/1/15 9,373,770
-------------
$ 23,415,727
-------------
HOSPITALS - 5.9%
NR A- $ 3,770 Connecticut HEFA, William
W. Backus Hospital,
6.375%, 7/1/22 $ 3,787,078
Baa1 NR 5,900 Connecticut HEFA, Griffin
Hospital, 5.75%, 7/1/23 5,211,706
</TABLE>
36
<PAGE> 37
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - (CONTINUED)
NR BBB- 2,000 Connecticut HEFA, New
Britain Memorial Hospital,
7.75%, 7/1/22 2,109,520
-------------
$ 11,108,304
-------------
HOUSING MORTGAGE &
REVENUE BONDS - 12.4%
Aa NR $ 100 Connecticut HFA, 7.40%,
11/15/99 $ 102,960
Aa AA 200 Connecticut HFA, 7.00%,
11/15/09 210,066
Aa AA 6,200 Connecticut HFA, 6.70%,
11/15/12 6,545,278
Aa AA 210 Connecticut HFA, 6.55%,
11/15/13 218,952
Aa AA+ 140 Connecticut HFA, 7.625%,
11/15/17 144,529
Aa AA 1,700 Connecticut HFA, 6.35%,
5/15/7 1,752,207
Aa AA 2,490 Connecticut HFA, 6.60%,
11/15/23 2,586,039
Aa AA 2,000 Connecticut HFA, 6.75%,
11/15/23 2,096,480
Aa AA 3,000 Connecticut HFA, 6.20%,
5/15/14 3,040,140
Aa AA 95 Connecticut HFA, 6.70%,
11/5/22 97,164
Aa AA 250 Connecticut HFA, 7.10%,
11/15/00 260,490
Aa AA 1,340 Connecticut HFA, 6.90%,
5/15/20 1,394,471
Aa AA 4,750 Connecticut HFA, (AMT),
6.20%, 11/15/22 4,757,267
-------------
$ 23,206,043
-------------
INDUSTRIAL DEVELOPMENT/
POLLUTION CONTROL
REVENUES - 3.7%
Aaa AAA $ 1,000 Connecticut Development
Authority PCR, Pfizer
Inc., 6.55%, 2/15/13 $ 1,077,150
Aa AA- 2,000 Connecticut Development
Authority, Economic
Development Projects,
Revenue Bonds, 6.00%,
11/15/08 2,088,040
NR NR 3,065 Connecticut Development
Authority Airport
Facility, Signature
Flight, 6.625%, 12/1/14 3,018,320
Baa3 BB+ 700 Puerto Rico Port
Authority, American
Airlines, (AMT) 6.30%,
6/1/23 702,268
-------------
$ 6,885,778
-------------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURED AIRPORTS - 5.0%
Aaa AAA $ 8,200 Connecticut Airport
Revenue Bonds, Bradley
International Airport,
(FGIC), 7.65%, 10/1/12 $ 9,385,802
-------------
INSURED COLLEGES AND
UNIVERSITIES - 2.4%
Aaa AAA $ 725 Connecticut HEFA,
Fairfield University
(MBIA), 5.00%, 7/1/18 $ 656,038
Aaa AAA 1,200 Connecticut HEFA,
Connecticut College
(MBIA), 6.625%, 7/1/11 1,292,868
Aaa AAA 1,000 University of Connecticut
(FGIC), 5.00%, 2/1/16 911,670
Aaa AAA 1,555 Connecticut HEFA, Choate
Rosemary College (MBIA),
6.80%, 7/1/15 (2) 1,695,292
-------------
$ 4,555,868
-------------
INSURED MUNICIPAL ELECTRIC - 1.8%
Aaa AAA $ 3,660 Connecticut Municipal
Electric Energy
Cooperative Bonds (MBIA),
5.00%, 1/1/18 $ 3,303,406
-------------
INSURED GENERAL OBLIGATIONS - 2.3%
Aaa AAA $ 1,220 Town of Bethel, (MBIA),
6.50%, 2/15/09 $ 1,355,127
Aaa AAA 740 Town of Stratford, (MBIA),
6.60%, 3/1/11 831,945
Aaa AAA 1,000 City of New Britain,
(MBIA), 6.00%, 3/1/12 1,051,800
Aaa AAA 1,000 Town of Plainfield,
(MBIA), 6.375%, 8/1/11 1,061,740
-------------
$ 4,300,612
-------------
INSURED HEALTHCARE - 0.8%
Aaa AAA $ 1,735 Connecticut HEFA, NHP, St.
Joseph's Living Center,
(AMBAC) 5.10%, 11/1/19 $ 1,587,091
-------------
INSURED HOSPITALS - 9.8%
Aaa AAA $ 1,000 Connecticut HEFA,
Bridgeport Hospital
(MBIA), 6.625%, 7/1/18 $ 1,058,790
Aaa AAA 6,750 Connecticut HEFA, St.
Francis Hospital (FGIC),
5.00%, 7/1/23 5,960,115
Aaa AAA 1,500 Connecticut HEFA, Lawrence
and Memorial Hospital
(MBIA), 5.00%, 7/1/13 1,377,780
Aaa AAA 5,750 Connecticut HEFA, Lawrence
and Memorial Hospital
(MBIA), 5.00%, 7/1/22 5,080,872
</TABLE>
37
<PAGE> 38
CONNECTICUT MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 HOSPITALS - (CONTINUED)
Aaa AAA 1,000 Connecticut HEFA, Hospital
of St. Raphael (AMBAC),
6.50%, 7/1/11 1,108,310
Aaa AAA 1,500 Connecticut HEFA, Hospital
of St. Raphael (AMBAC),
6.625%, 7/1/14 1,587,825
Aaa AAA 2,000 Connecticut HEFA, Yale --
New Haven Hospital (MBIA),
6.50%, 7/1/12 2,122,740
-------------
$ 18,296,432
-------------
INSURED HOUSING - 0.2%
NR AA $ 305 Puerto Rico Housing
Finance Corp (SEC, AMBAC),
7.50%, 10/1/11 $ 315,544
-------------
INSURED SOLID WASTE - 1.0%
Aaa AAA $ 2,000 Connecticut Resources
Recovery Authority Mid-
Connecticut System Bonds
(MBIA), 5.50%, 11/15/12 $ 1,961,880
-------------
SOLID WASTE - 8.4%
A NR $ 2,500 Bristol Resource Recovery
Facility Operating
Committee, (Ogden Martin
Systems), 6.50%, 7/1/14 $ 2,582,625
Baa1 A 1,000 Connecticut Resources
Recovery Authority,
American REF-FUEL Company,
(AMT), 8.10%, 11/15/15 1,086,510
Baa1 AA- 450 Connecticut Resources
Recovery Authority,
American REF-FUEL Company,
(AMT), 8.00%, 11/15/15 487,980
A2 A 4,250 Connecticut Resources
Recovery Authority,
American REF-FUEL Company,
(AMT), 6.45%, 11/15/22 4,322,888
NR A- 7,970 Eastern Connecticut
Resource Recovery
Authority, Wheelabrator
Lisbon, (AMT), 5.50%,
1/1/20 7,122,869
-------------
$ 15,602,872
-------------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIAL TAX - 6.0%
A1 AA- $ 1,000 State of Connecticut
Special Tax Obligation,
(STOB), 5.00%, 10/1/13 $ 916,760
A1 AA- 2,000 State of Connecticut,
(STOB), 6.50%, 10/1/12 2,191,780
A1 AA- 3,180 State of Connecticut,
(STOB), 6.125%, 9/1/12 3,358,684
Baa1 A 4,965 Puerto Rico Highway &
Transportation Authority,
5.50%, 7/1/15 4,800,510
-------------
$ 11,267,734
-------------
STUDENT LOANS - 2.5%
A1 NR $ 430 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 7.375%,
11/15/05 $ 451,560
A1 NR 2,695 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 7.50%,
11/15/10 2,834,277
A1 NR 1,310 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT), 6.20%,
11/15/09 1,332,742
-------------
$ 4,618,579
-------------
UTILITIES - 5.6%
A1 A+ $ 2,000 Connecticut State
Development Authority, New
England Power, 7.25%,
10/15/15 $ 2,141,960
NR BBB 3,625 Guam Power Authority
Revenue Bonds, 6.30%,
10/1/22 3,569,828
NR BBB 1,100 Guam Power Authority
Revenue Bonds, 6.625%,
10/1/14 1,124,739
NR NR 3,500 Virgin Islands Water and
Power Authority, Electric
Revenue System Bonds,
7.40%, 7/1/11 3,696,560
-------------
$ 10,533,087
-------------
</TABLE>
38
<PAGE> 39
- --------------------------------------------------------------------------------
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 REVENUE - 1.8%
Aaa AA+ $ 1,250 State of Connecticut Clean
Water Fund Revenue Bonds,
6.00%, 10/1/12 $ 1,309,387
NR A+ 2,225 Connecticut Development
Authority Water
Facilities, Stamford Water
Company, 5.30%, 9/1/28 2,021,835
-------------
$ 3,331,222
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $185,036,490) $ 187,085,613
=============
</TABLE>
(1) This security has been issued as an inverse floater bond.
(2) The above designated securities have 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 Connecticut
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 July 31, 1996, 23.4% 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 institution ranged from 2.5% to 12.9% of total investments.
See notes to financial statements
39
<PAGE> 40
Michigan Municipals Portfolio
Portfolio of Investments - July 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 99.9%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRIC UTILITIES - 2.2%
NR BBB $ 1,000 Guam Power Authority,
6.625%, 10/1/14 $ 1,022,490
Baa1 BBB+ 500 Michigan South Central
Power Agency Supply
System, 6.75%, 11/1/10 517,545
Baa1 BBB 1,790 Monroe County, MI PCR
Detroit Edison Project,
7.75%, 12/1/19 1,936,583
Baa1 A- 365 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 391,171
-------------
$ 3,867,789
-------------
ESCROWED - 6.7%
NR AA $ 2,550 Clintondale, Michigan
Community Schools, 6.75%,
5/1/24 $ 2,856,255
Ba1 AAA 500 Detroit, Michigan General
Obligation, 8.0%, 4/1/11 576,735
NR AA 940 Detroit City School
District, Michigan School
Building and Site, 7.15%,
5/1/11 1,052,659
Aaa AAA 1,000 Lake Orion, Michigan
School District General
Obligation, 7.0%, 5/1/20 1,151,960
Aaa AAA 750 Michigan HFA, Oakwood
Hospital, 7.20%, 11/1/15 834,870
Aaa AAA 3,500 Monroe County, Michigan -
EDC Mercy Memorial
Hospital, 7.0%, 9/1/21 3,926,510
NR AA 955 Okemos Public Schools,
Michigan School Building
and Site, 6.90%, 5/1/11 1,059,420
-------------
$ 11,458,409
-------------
GENERAL OBLIGATIONS - 6.0%
Aa AA $ 500 Avondale School District,
Michigan School Building
and Site, 6.75%, 5/1/14 $ 530,645
Ba1 BBB 500 Detroit City, Michigan,
6.70%, 4/1/10 527,690
Ba1 BBB 5,630 Detroit City, Michigan,
6.35%, 4/1/14 5,434,992
A AA 500 East Lansing, Michigan
Building Authority, 7.0%,
10/1/16 530,880
Aa AA 1,350 Martin, Michigan Public
School Building and Site,
6.60%, 5/1/20 1,416,339
Aa AA 1,000 Mattawan, Michigan
Consolidated Schools,
6.40%, 5/1/09 1,052,780
Baa1 A 1,000 Puerto Rico Aqueduct &
Sewer Authority, 5.00%,
7/1/15 890,890
-------------
$ 10,384,216
-------------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - 14.8%
NR BBB $ 2,000 Michigan HFA Central
Michigan Community
Hospital, 6.25%, 10/1/27 $ 1,880,200
A A 450 Michigan HFA Detroit
Medical Center Obligated
Group, 7.50%, 8/15/11 485,393
A A 4,550 Michigan HFA Detroit
Medical Center Obligated
Group, 5.50%, 8/15/23 4,129,307
A A 5,500 Michigan HFA Detroit
Medical Center Obligated
Group, 6.25%, 8/15/13 5,545,100
Aa AA 250 Michigan HFA Henry Ford
Continuing Care
Corporation, 6.75%, 7/1/11 265,425
A1 NR 9,000 Michigan HFA McLaren
Obligated Group, 4.50%,
10/15/21 7,080,570
A A 4,130 Michigan HFA MidMichigan
Obligated Group, 6.625%,
6/1/10 4,212,310
Aa AA 1,750 Royal Oak, Michigan
William Beaumont Hospital,
6.75%, 1/1/20 1,819,755
-------------
$ 25,418,060
-------------
HOUSING - 1.3%
NR A+ $ 1,210 Michigan HDA Rental
Housing (AMT), 7.15%,
4/1/10 $ 1,282,491
NR A+ 895 Michigan HDA Single Family
Mortgage, 7.10%, 4/1/21 940,556
-------------
$ 2,223,047
-------------
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION CONTROL
REVENUE - 11.6%
Baa1 BBB $ 6,970 Dickinson, Michigan -
Champion International,
5.85%, 10/1/18 $ 6,726,329
A3 A- 5,970 Michigan Strategic Fund -
General Motors, 6.20%,
9/1/20 6,045,938
NR B+ 110 Michigan Strategic Fund -
KMart Corporation, 6.80%,
6/15/07 104,568
NR NR 3,000 Michigan Strategic Fund -
SD Warren Company, 7.375%,
1/15/22 3,037,920
Baa3 BB+ 3,500 Puerto Rico Port Authority
American Airlines (AMT),
6.25%, 6/1/26 3,499,580
NR BB 530 Richmond, Michigan EDC
KMart Corporation, 6.625%,
1/1/07 497,946
-------------
$ 19,912,281
-------------
</TABLE>
40
<PAGE> 41
- --------------------------------------------------------------------------------
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 - 4.9%
Aaa AAA $ 500 Eastern Michigan
University, (AMBAC),
6.375%, 6/1/14 $ 519,320
Aaa AAA 1,500 Ferris State University,
Michigan (MBIA), 5.25%,
10/1/15 1,415,130
Aaa AAA 3,360 Ferris State University,
Michigan (MBIA), 5.25%,
10/1/20 3,125,270
Aaa AAA 500 Michigan Higher Education
Student Loan (AMBAC),
6.875%, 10/1/07 528,000
Aaa AAA 2,600 Western Michigan
University (FGIC), 5.00%,
7/15/21 2,290,132
Aaa AAA 500 Western Michigan
University (AMBAC), 6.50%,
7/15/21 522,070
-------------
$ 8,399,922
-------------
INSURED ELECTRIC UTILITIES - 3.0%
Aaa AAA $ 300 Michigan Strategic Fund,
Detroit Edison Company
(FGIC), 6.95%, 5/1/11 $ 341,217
Aaa AAA 4,000 Michigan Strategic Fund,
Detroit Edison Company
(FGIC), 6.95%, 9/1/21 4,286,640
Aaa AAA 550 Monroe County, Michigan
PCR Detroit Edison Company
(FGIC) (AMT), 7.65%,
9/1/20 607,987
-------------
$ 5,235,844
-------------
INSURED GENERAL OBLIGATION - 16.8%
Aaa AAA $ 3,330 Big Rapids, Michigan
School District (FGIC),
5.625%, 5/1/20 $ 3,221,708
Aaa AAA 1,000 Big Rapids, Michigan
School District (FGIC),
5.625%, 5/1/25 958,050
Aaa AAA 7,645 Chippewa Valley, Michigan
School District (FGIC),
5.00%, 5/1/21 6,754,816
Aaa AAA 1,000 Dearborn, Michigan School
District (MBIA), 5.00%,
5/1/10 942,020
Aaa AAA 2,000 Grand Ledge, Michigan
School District (MBIA),
5.375%, 5/1/24 1,885,880
Aaa AAA 2,000 Holland, Michigan School
District (AMBAC), 0%,
5/1/17 581,020
Aaa AAA 3,000 Kalamazoo, Michigan Public
Library (MBIA), 5.40%,
5/1/14 2,913,090
Aaa AAA 1,500 Lincoln Park, Michigan
School District (FGIC),
5.90%, 5/1/26 1,504,875
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA 4,500 Livonia, Michigan School
District (FGIC), 5.125%,
5/1/22 4,062,780
Aaa AAA 2,000 Lowell, Michigan Schools
(FGIC), 0%, 5/1/16 634,700
Aaa AAA 1,740 Napoleon, Michigan School
District (FGIC) 5.50%,
5/1/24 1,636,348
Aaa AAA 2,610 Okemos, Michigan Public
Schools (MBIA), 0%, 5/1/16 817,243
Aaa AAA 500 Pellston, Michigan Public
Schools (MBIA), 6.625%,
5/1/12 534,375
Aaa AAA 1,000 Riverview Community School
District, Michigan
(AMBAC), 5.25%, 5/1/21 923,190
Aaa AAA 250 Traverse, Michigan Public
Schools (MBIA), 5.70%,
5/1/16 248,803
Aaa AAA 1,460 Willow Run, Michigan
Community School District
(AMBAC), 5.00%, 5/1/18 1,296,802
-------------
$ 28,915,700
-------------
INSURED HOSPITAL - 10.0%
Aaa AAA $ 3,000 Dearborn, Michigan EDA
Oakwood Obligated Group
(MBIA), 5.25%, 8/15/14 $ 2,816,940
Aaa AAA 3,500 Jackson, Michigan HFA W.A.
Foote Memorial (FGIC),
4.75%, 6/1/15 3,053,050
Aaa AAA 3,235 Kalamazoo, Michigan HFA
Borgess Medical Center
(FGIC), 5.25%, 6/1/17 2,995,448
Aaa AAA 3,500 Kent, Michigan HFA
Butterworth Health System
(MBIA), 6.125%, 1/15/21 3,553,060
Aaa AAA 3,200 Michigan HFA Linked Bulls
& Bears (FSA), 6.10%,
8/15/22 3,267,008
Aaa AAA 1,750 Michigan HFA Mercy
Memorial Hospital (MBIA),
5.25%, 6/1/21 1,604,698
-------------
$ 17,290,204
-------------
INSURED HOUSING - 0.3%
Aaa AAA $ 500 Michigan HDA Parkway
Meadows Projects (FSA),
6.85%, 10/15/18 $ 527,470
-------------
INSURED SPECIAL TAX - 0.2%
Aaa AAA $ 400 Grand Rapids, Michigan
Downtown Development
Authority Tax Increment
(MBIA), 6.875%, 6/1/24 $ 433,120
-------------
</TABLE>
41
<PAGE> 42
MICHIGAN MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 - 1.7%
Aaa AAA $ 3,150 Wayne County, Michigan
Airport (MBIA), 5.25%,
12/1/21 $ 2,886,125
-------------
INSURED WATER & SEWER - 8.1%
Aaa AAA $ 300 Clinton Township, Michigan
Water and Sewage System
(AMBAC), 4.75%, 7/1/09 $ 272,912
Aaa AAA 400 Clinton Township, Michigan
Water and Sewage System
(AMBAC), 4.75%, 7/1/10 360,264
Aaa AAA 400 Clinton Township, Michigan
Water and Sewage System
(AMBAC), 4.75%, 7/1/11 356,240
Aaa AAA 400 Clinton Township, Michigan
Water and Sewage System
(AMBAC), 4.75%, 7/1/12 355,964
Aaa AAA 4,425 Detroit City, Michigan
Water Supply System
(FGIC), 6.25%, 7/1/12 4,735,414
Aaa AAA 7,180 Detroit City, Michigan
Water Supply System
(FGIC), 4.75%, 7/1/19 6,181,765
Aaa AAA 2,000 Detroit City, Michigan
Water Supply System
(FGIC), 5.00%, 7/1/25 1,761,640
-------------
$ 14,024,199
-------------
LIFE CARE - 0.6%
NR NR $ 1,000 Michigan HFA Presbyterian
Village, 6.50%, 1/1/25 $ 983,380
-------------
MISCELLANEOUS - 3.7%
NR A $ 590 Michigan Municipal Bond
Authority Local Government
Loan, 6.90%, 5/1/21 $ 647,289
Aa AA 2,550 Michigan Municipal Bond
Authority Local Government
Loan-Qualified School,
6.50%, 5/1/07 2,769,988
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa AA 760 Michigan Municipal Bond
Authority Local Government
Loan, 6.50%, 5/1/08 823,445
NR A- 2,000 Michigan Strategic
Environmental Research
Institute, 6.375%, 8/15/12 2,066,440
-------------
$ 6,307,162
-------------
SPECIAL TAX REVENUE - 7.0%
NR BBB+ $ 250 Battle Creek, Michigan
Downtown Development
Authority Tax Increment,
7.60%, 5/1/16 $ 288,381
NR BBB+ 1,315 Battle Creek, Michigan
Downtown Development
Authority Tax Increment,
7.65%, 5/1/22 1,521,021
NR A 7,650 Detroit, Michigan
Convention Facility Cobo
Hall Expansion Project,
5.25%, 9/30/12, (1) 7,076,021
NR A- 3,050 Detroit, Michigan Downtown
Tax Increment, 0%, 7/1/16 855,373
NR A- 2,000 Detroit, Michigan Downtown
Tax Increment, 0%, 7/1/20 424,500
NR A 1,825 Michigan Muni Bond
Authority Local Government
Loan Project, 6.75%,
5/1/12 1,959,886
-------------
$ 12,125,182
-------------
WATER & SEWER - 1.0%
Aa AA $ 1,895 Lansing City, Michigan
Water and Electric Utility
System, 4.90%, 7/1/10 $ 1,755,812
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $165,902,868) $ 172,147,922
-------------
</TABLE>
42
<PAGE> 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS - 0.1%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
160 30 year-U.S. Treasury
Bond, American, expiration
9/19/96, strike price
$104.00 $ 15,000
178 30 year-U.S. Treasury
Bond, American, expiration
9/19/96, strike price
$106.00 58,406
-------------
TOTAL PUT OPTIONS ON
FINANCIAL FUTURE CONTRACTS
(IDENTIFIED COST,
$274,430) $ 73,406
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST,
$166,177,298) $ 172,221,328
=============
</TABLE>
(1) Security has been segregated to cover margin requirements for 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 Michigan
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 July 31, 1996, 45.1% 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 institution ranged from 2.2% to 25.6% of total investments.
See notes to financial statements
43
<PAGE> 44
Minnesota Municipals Portfolio
Portfolio of Investments - July 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 99.9%
- --------------------------------------------------------------------------------
<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 $1,000 St. Paul Housing &
Redevelopment Authority,
Highland Park, 8.75%,
11/1/24 $ 1,051,150
-----------
EDUCATION - 2.5%
A NR $ 100 Minnesota Higher Education
Facilities Authority, St.
Olaf College, 6.25%, 4/1/10 $ 100,070
Baa NR 500 Minnesota Higher Education
Facilities Authority, St.
Mary's College, 6.15%,
10/1/23 493,450
Aa AA 1,250 University of Minnesota,
Variable, 8/15/03 (1) 1,241,550
-----------
$ 1,835,070
-----------
ESCROWED - 3.8%
Aaa AAA $ 565 Duluth Economic Development
Authority, The Duluth
Clinic, 6.30%, 11/1/22 $ 618,839
Aa1 AAA 100 Minnesota Public Finance
Authority, Pollution
Control, 7.00%, 3/1/09 108,475
Aa1 AAA 150 Minnesota Public Finance
Authority, Pollution
Control, 6.70%, 3/1/13 165,089
Aa1 AA+ 1,700 State of Minnesota,
Variable, 8/1/11 (1) 1,958,178
-----------
$ 2,850,581
-----------
GENERAL OBLIGATIONS - 7.2%
Aaa AAA $ 700 City of Minneapolis, 6.25%,
4/1/12 $ 738,185
Aaa AAA 2,000 City of Minneapolis, Sports
Arena Project, 5.125%,
10/1/20 1,845,060
Aaa AAA 200 Cities of Minneapolis & St.
Paul, (AMT), 6.60%, 1/1/09 210,726
Aaa AAA 300 Cities of Minneapolis & St.
Paul, (AMT), 6.60%, 1/1/10 316,089
A AA- 200 City of Saint Cloud,
Variable, 8/1/13 (1) 207,508
Aaa AA+ 1,000 State of Minnesota, 5.40%,
8/1/23 989,040
Aaa AA+ 1,000 State of Minnesota, Duluth
Airport, (AMT), 6.25%,
8/1/14 1,031,160
-----------
$ 5,337,768
-----------
HOSPITALS - 13.6%
NR A $ 750 City of Bemidji, North
County Health Care
Facilities, 5.625%, 9/1/21 $ 700,860
A A- 1,250 St. Paul Minnesota Housing
and Redevelopment
Authority, Group Health
Plan, Inc., 6.75%, 12/1/13 1,336,738
A A- 250 St. Paul Minnesota Housing
and Redevelopment
Authority, Group Health
Plan, Inc., 6.90%, 10/15/22 269,355
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
NR BBB+ 2,120 City of Red Wing, Minnesota
Health Care Facilities
Revenue, River Region
Obligated Group, 6.50%,
9/1/22 2,085,868
NR AA+ 2,200 City of Rochester,
Minnesota Health Care
Facilities, Mayo
Foundation/Medical Center,
Variable, 11/15/15 (1) 2,247,652
Baa BBB- 1,000 St. Paul Housing and
Redevelopment Authority,
Healtheast Project, 6.625%,
11/1/17 1,001,360
Baa BBB- 2,500 St. Paul Housing and
Redevelopment Authority,
Healtheast Project, 6.625%,
11/1/17 2,503,400
-----------
$ 10,145,233
-----------
HOUSING - 20.4%
NR AAA $ 300 City of Coon Rapids,
Minnesota Multi-Family
Housing, Browns Meadow
Manor, (FHA), (AMT), 6.85%,
7/1/33 $ 305,610
NR AAA 1,395 County of Dakota, Minnesota
Housing and Redevelopment
Authority, (GNMA), 7.375%,
12/1/29 (2) 1,499,681
Aa NR 1,200 City of Maplewood,
Minnesota Multi-Family
Housing, Beaver Creek
Apartments, (FHA), 6.50%,
9/1/24 1,242,960
Aa NR 1,250 St. Louis Park, Minnesota
Multi-Family Mortgage,
6.25%, 12/1/28 1,266,050
Aaa NR 1,685 St. Paul, Minnesota, Multi-
Family Mortgage, Sun Cliffe
Project, 6.00%, 1/1/31 1,632,512
NR AAA 90 Minneapolis and St. Paul
Housing Finance Board,
(GNMA), (AMT), 7.30%,
8/1/31 93,992
Aa AA+ 370 Minnesota Housing Finance
Agency, Single Family
Mortgage, 7.70%, 7/1/14 392,407
Aa AA+ 380 Minnesota Housing Finance
Agency, Single Family
Mortgage, (AMT), 7.05%,
7/1/22 396,830
Aa AA+ 430 Minnesota Housing Finance
Agency, Single Family
Mortgage, 6.95%, 7/1/16 455,417
</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>
HOUSING - (CONTINUED)
Aa AA+ 1,000 Minnesota Housing Finance
Agency, Single Family
Mortgage, 6.75%, 7/1/12 1,049,790
Aa AA+ 1,235 Minnesota Housing Finance
Agency, Single Family
Mortgage, (AMT), 6.85%,
1/1/24 1,288,389
Aa AA+ 4,200 Minnesota Housing Finance
Agency, Single Family
Mortgage, (AMT), 6.50%,
1/1/26 4,295,046
Aa AA+ 680 Minnesota Housing Finance
Agency, Single Family
Mortgage, (AMT), 6.75%,
1/1/26 706,411
NR AAA 220 St. Paul, Minnesota Housing
and Redevelopment
Authority, (FNMA), 6.95%,
12/1/31 229,698
NR AAA 350 St. Paul, Minnesota Housing
and Redevelopment
Authority, (FNMA), 6.90%,
12/1/21 365,456
-----------
$ 15,220,249
-----------
INDUSTRIAL DEVELOPMENT/
POLLUTION CONTROL - 9.8%
NR AA- $ 300 City of Minneapolis,
Minnesota Community
Development Agency, 6.40%,
12/1/04 $ 313,413
NR BBB+ 100 City of Minneapolis,
Minnesota Community
Development Agency, 7.35%,
12/1/09 104,557
NR BBB+ 1,250 City of Minneapolis,
Minnesota Community
Development Agency, 7.40%,
12/1/21 1,308,413
NR BBB+ 1,605 City of Minneapolis,
Minnesota Community
Development Agency, (AMT),
6.80%, 12/1/24 1,664,047
NR BBB+ 750 City of Minneapolis,
Minnesota Community
Development Agency, 6.00%,
6/1/11 724,943
Aa3 NR 3,000 Seaway Port Authority of
Duluth, Minnesota, Cargill,
Inc., 6.80%, 5/1/12 3,205,740
-----------
$ 7,321,113
-----------
INSURED GENERAL OBLIGATION - 1.9%
Aaa AAA $1,330 St. Francis, Minnesota
Independent School District
No. 15, (FGIC), 6.35%,
2/1/12 $ 1,424,882
-----------
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
INSURED HOSPITALS - 15.8%
Aaa AAA $1,435 Duluth Economic Development
Authority, The Duluth
Clinic, (AMBAC), 6.30%,
11/1/22 $ 1,484,149
Aaa AAA 100 Minneapolis and St. Paul
Health Care Systems, Health
One Obligated Group,
(MBIA), 7.40%, 8/15/11 110,526
Aaa AAA 3,455 Minneapolis and St. Paul
Health Care Systems,
Healthspan, (AMBAC), 4.75%,
11/15/18 2,965,633
Aaa AAA 250 City of Minneapolis,
Fairview Hospital and
Healthcare, (MBIA), 6.50%,
1/1/11 267,083
Aaa AAA 450 Plymouth, Minnesota Health
Facilities, Westhealth
Project, (CGIC), 6.25%,
6/1/16 463,257
Aaa AAA 1,000 City of St. Cloud,
Minnesota Hospital
Facilities, The Saint Cloud
Hospital, (AMBAC), 6.75%,
7/1/15 1,110,330
Aaa AAA 4,000 City of St. Louis Park,
Minnesota, Health Care
Facilities Health System
Minnesota Obligated Group,
(AMBAC), 5.20%, 7/1/23 3,619,480
Aaa AAA 1,800 St. Paul Housing and
Redevelopment Authority,
St. Paul-Ramsey Medical
Center Project, (AMBAC),
5.55%, 5/15/23 1,708,578
-----------
$ 11,729,036
-----------
INSURED HOUSING - 2.2%
Aaa AAA $1,500 SCA Tax Exempt Trust,
Burnsville, Minnesota
Multi-Family Housing,
(FSA), 7.10%, 1/1/30 $ 1,627,890
-----------
INSURED SPECIAL TAX - 3.9%
Aaa AAA $3,000 St. Paul Housing and
Redevelopment Authority,
Civic Center Project,
(MBIA), 5.45%, 11/1/13 $ 2,902,080
-----------
INSURED UTILITIES - 5.7%
Aaa AAA $ 300 Northern Municipal Power
Agency, (AMBAC), 6.00%,
1/1/19 $ 301,242
Aaa AAA 450 Southern Minnesota
Municipal Power Agency,
(MBIA), 5.00%, 1/1/12 420,588
Aaa AAA 300 Southern Minnesota
Municipal Power Agency,
(MBIA), Variable, 1/1/18
(1) 288,159
Aaa AAA 6,950 Southern Minnesota
Municipal Power Agency,
(MBIA), 0%, 1/1/21 1,649,791
</TABLE>
45
<PAGE> 46
MINNESOTA MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 - (CONTINUED)
Aaa AAA 6,000 Southern Minnesota
Municipal Power Agency,
(MBIA), 0%, 1/1/25 1,109,820
Aaa AAA 510 Western Minnesota Municipal
Power Agency, (MBIA),
5.50%, 1/1/15 500,713
-----------
$ 4,270,313
-----------
LEASE/CERTIFICATE OF
PARTICIPATION - 3.0%
Baa1 NR $ 350 City of Cambridge,
Minnesota Economic
Development Authority,
6.25%, 2/1/14 $ 352,898
Aa AA 1,770 Hennepin County, Minnesota
Lease Revenue Certificates
of Participation, 6.80%,
5/15/17 1,859,102
-----------
$ 2,212,000
-----------
SOLID WASTE - 0.7%
Aa3 AA- $ 450 Anoka County, Minnesota
Solid Waste Disposal,
National Rural Utility,
(AMT), 6.95%, 12/1/08 $ 482,387
-----------
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
UTILITIES - 5.4%
Baa1 BBB+ $1,000 Bass Brook, Minnesota
Pollution Control Revenue,
Minnesota Power & Light
Company, 6.00%, 7/1/22 $ 986,990
A A 1,500 Northern Municipal Power
Agency, Minnesota Electric,
7.25%, 1/1/16 1,582,515
A A+ 1,100 Southern Minnesota
Municipal Power Agency,
5.00%, 1/1/12 1,000,648
A1 A 450 Western Minnesota Municipal
Power Agency, 7.00%, 1/1/13 462,726
-----------
$ 4,032,879
-----------
WATER & SEWER - 2.6%
Aa1 AAA $1,835 Minnesota Public Facilities
Authority, Water Pollution
Control, 6.50%, 3/1/14 $ 1,960,018
-----------
TOTAL TAX-EXEMPT
INVESTMENTS
(IDENTIFIED COST,
$70,994,621) $ 74,402,649
-----------
</TABLE>
46
<PAGE> 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS - 0.1%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
125 30 year-U.S. Treasury Bond,
American, expiration
9/19/96, Strike Price
$106.00 (identified cost,
$90,665) $ 41,016
------------
TOTAL INVESTMENTS
(IDENTIFIED COST,
$71,085,286) $ 74,443,665
============
</TABLE>
(1) The above designated securities have been issued as inverse floater bonds.
(2) The above designated securities have 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 Minnesota
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 July 31, 1996, 29.5% 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 institution ranged from 2.2% to 15.0% of total investments.
See notes to financial statements
47
<PAGE> 48
New Jersey Municipals Portfolio
Portfolio of Investments -- July 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 - 0.9%
NR NR $ 3,630 New Jersey Economic
Development Authority,
Forsgate, 8.625%, 6/1/25 $ 3,630,545
--------------
COGENERATION - 5.3%
NR BB+ $12,750 New Jersey Economic
Development Authority,
Vineland Cogeneration
Limited Partnership,
(AMT), 7.875%, 6/1/19 $ 13,666,215
NR BBB- 1,725 New Jersey Economic
Development Authority,
Trigen Trenton Project,
6.20%, 12/1/07 1,700,039
NR NR 5,000 Port Authority of New
York and New Jersey,
KIAC, 6.75%, 10/1/19 5,007,600
--------------
$ 20,373,854
--------------
EDUCATION - 2.5%
Baa1 BBB $ 2,480 New Jersey Educational
Facilities Authority,
Seton Hall University,
7.00%, 7/1/21 $ 2,570,173
Aa1 AA+ 1,000 New Jersey Educational
Facilities Authority,
Princeton Theological
Seminary, 6.375%, 7/1/22 1,034,700
NR NR 8,800 New Jersey Higher
Educational Student Loan
Bonds, (AMT), 7/1/10 3,348,752
A1 AA 2,500 Rutgers, The State
University of New Jersey,
6.85%, 5/1/21 2,699,250
--------------
$ 9,652,875
--------------
ESCROWED/PREREFUNDED - 4.0%
Aaa AAA $ 870 The City of Newark,
(AMBAC), Prerefunded to
10/1/99, 7.375%, 10/1/07 $ 961,115
NR NR 2,000 County of Passaic,
Prerefunded to 9/1/99,
6.70%, 9/1/13 2,169,960
Baa1 A 5,645 Puerto Rico Aqueduct and
Sewer Authority,
Prerefunded to 7/1/98,
7.875%, 7/1/17 6,159,993
Aa AAA 1,205 New Jersey Health Care
Facilities Financing
Authority, Barnett
Hospital, (FHA),
Prerefunded to 8/1/01,
6.80%, 8/1/19 1,329,501
Aa AA 1,040 New Jersey Wastewater
Treatment Trust,
Prerefunded to 5/15/98,
7.25%, 5/15/08 1,116,180
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa1 A 2,100 Puerto Rico Highway and
Transportation Authority,
Prerefunded to 7/1/02,
6.625%, 7/1/18 2,326,737
A AA 1,000 University of Medicine
and Dentistry,
Prerefunded to 12/1/99,
7.20%, 12/1/19 1,100,270
--------------
$ 15,163,756
--------------
GENERAL OBLIGATIONS - 13.9%
NR BBB $ 9,745 Government of Guam,
5.40%, 11/15/18 $ 8,543,148
NR A+ 5,000 The Hudson County
Improvement Authority,
6.625%, 8/1/25 5,212,050
Aa1 NR 3,000 Mercer County Improvement
Authority Solid Waste,
0%, 4/1/10 1,392,540
Baa1 A 200 Commonwealth of Puerto
Rico, 5.40%, 7/1/25 184,894
Baa1 A 1,990 Commonwealth of Puerto
Rico, 6.45%, 7/1/17 2,083,232
Baa1 A 5,000 Commonwealth of Puerto
Rico, 6.50%, 7/1/23 5,245,200
Baa1 A 10,200 Puerto Rico Aqueduct and
Sewer Authority, 5.00%,
7/1/19 8,915,310
Baa1 A 3,750 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities, 5.75%,
7/1/15 3,648,713
Baa1 A 2,000 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities, 5.50%,
7/1/21 1,861,680
Baa1 A 2,075 Puerto Rico Public
Buildings Authority,
Public Education and
Health Facilities, 5.75%,
7/1/16 2,010,364
NR NR 13,350 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 14,112,684
--------------
$ 53,209,815
--------------
HOSPITALS - 7.5%
Aa AAA $ 9,585 New Jersey Health Care
Facilities Financing
Authority, Barnett
Hospital, (FHA), 6.80%,
8/1/19 $ 10,123,581
A A- 2,300 New Jersey Health Care
Facilities Financing
Authority, Atlantic City
Medical Center, 6.80%,
7/1/11 2,430,594
Baa1 NR 5,875 New Jersey Health Care
Facilities Financing
Authority, Deborah Heart
and Lung Center, 6.30%,
7/1/23 5,836,871
</TABLE>
48
<PAGE> 49
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - (CONTINUED)
Baa NR 2,000 New Jersey Health Care
Facilities Financing
Authority, Southern Ocean
County Hospital, 6.25%,
7/1/23 1,907,440
A A 9,425 New Jersey Health Care
Facilities Financing
Authority, Chilton
Memorial Hospital, 5.00%,
7/1/13 8,376,752
--------------
$ 28,675,238
--------------
HOUSING - 3.9%
NR AAA $ 3,700 New Jersey Housing and
Mortgage Finance Agency,
Presidential Plaza,
(FHA), 7.00%, 5/1/30 $ 3,872,235
NR AAA 2,000 New Jersey Housing and
Mortgage Finance Agency,
Presidential Plaza,
(FHA), 6.95%, 5/1/13 2,111,180
NR AA+ 1,000 New Jersey Housing and
Mortgage Finance Agency,
Section 8, 7.10%, 11/1/12 1,054,100
NR AA+ 1,975 New Jersey Housing and
Mortgage Finance Agency,
Section 8, 7.10%, 11/1/11 2,081,847
NR AA+ 1,250 New Jersey Housing and
Mortgage Finance Agency,
Rental Housing, (AMT),
7.25%, 11/1/22 1,303,088
NR A+ 1,000 New Jersey Housing and
Mortgage Finance Agency,
Rental Housing, (AMT),
7.10%, 5/1/22 1,044,540
NR A+ 3,000 New Jersey Housing and
Mortgage Finance Agency,
Section 8, 6.60%, 11/1/14 3,089,760
Aaa AAA 195 Puerto Rico Housing
Finance Corporation
Mortgage Revenue (GNMA),
6.85%, 10/15/23 204,313
--------------
$ 14,761,063
--------------
INDUSTRIAL DEVELOPMENT/
POLLUTION CONTROL - 9.6%
NR NR $ 2,000 Middlesex County
Pollution Control
Financing Authority,
Amerada Hess Corporation,
7.875%, 6/1/22 $ 2,208,700
NR NR 4,000 Middlesex County
Pollution Control
Financing Authority,
Amerada Hess Corporation,
6.875%, 12/1/22 4,131,040
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa1 NR 3,000 New Jersey Economic
Development Authority,
Garden State Paper
Company, (AMT), 7.125%,
4/1/22 3,041,010
NR NR 2,000 New Jersey Economic
Development Authority,
The Seeing Eye, Inc.,
7.30%, 4/1/11 2,100,480
NR NR 5,640 New Jersey Economic
Development Authority,
Holt Hauling, (AMT),
8.95%, 12/15/18 5,887,427
NR NR 1,160 New Jersey Economic
Development Authority,
National Association of
Accountants, Inc. 7.65%,
7/1/09 1,227,883
NR AA- 3,300 New Jersey Economic
Development Authority,
Oak Grove Associates,
6.125%, 12/1/06 3,435,960
Baa1 BBB+ 2,135 New Jersey Economic
Development Authority,
GATX Terminals
Corporation, 7.30%,
9/1/19 2,364,897
Aa3 AA- 1,700 Puerto Rico Industrial,
Medical and Environmental
Pollution Control
Authority, Motorola,
Inc., 6.75%, 1/1/14 1,812,149
Baa3 BB+ 7,750 Puerto Rico Port
Authority, American
Airlines, (AMT), 6.30%,
6/1/23 7,775,110
Baa3 BB+ 3,000 Puerto Rico Port
Authority, American
Airlines, (AMT), 6.25%,
6/1/26 2,999,640
--------------
$ 36,984,296
--------------
INSURED EDUCATION - 0.6%
Aaa AAA $ 2,000 New Jersey State
Educational Facilities
Authority, Seton Hall
University, (BIGI),
6.85%, 7/1/19 $ 2,145,820
--------------
INSURED HOSPITAL - 1.0%
Aaa AAA $ 2,000 New Jersey Health Care
Facilities Financing
Authority, Hackensack
Medical Center, (FGIC),
6.25%, 7/1/21 $ 2,042,080
Aaa AAA 1,570 New Jersey Health Care
Facilities Financing
Authority, Cathedral
Health Services, (MBIA),
7.25%, 2/15/21 1,724,551
--------------
$ 3,766,631
--------------
</TABLE>
49
<PAGE> 50
NEW JERSEY MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 HOUSING - 1.2%
Aaa AAA $ 1,410 New Jersey Housing and
Mortgage Finance Agency,
(MBIA), 7.375%, 10/1/17 $ 1,464,384
Aaa AAA 1,435 New Jersey Housing and
Mortgage Finance Agency,
(AMT), (MBIA), 7.70%,
10/1/29 1,500,938
Aaa AAA 1,685 Pennsauken Township
Housing Finance
Corporation, (MBIA),
8.00%, 4/1/11 1,765,829
--------------
$ 4,731,151
--------------
INSURED LEASE REVENUE - 5.1%
Aaa AAA $ 3,900 County of Atlantic, New
Jersey, Public Facilities
Lease Agreement, (FGIC),
6.00%, 3/1/13 $ 4,140,707
Aaa AAA 1,750 County of Hudson, New
Jersey Correctional
Facility, (MBIA), 6.50%,
12/1/11 1,877,768
Aaa AAA 6,240 County of Hudson, New
Jersey Correctional
Facility, (MBIA), 6.60%,
12/1/21 6,604,042
Aaa AAA 2,500 County of Hudson, New
Jersey Improvement
Authority, Secondary
Yield Curve Notes,
(FGIC), Variable, 12/1/25
(1) 2,546,700
Aaa AAA 1,800 County of Middlesex, New
Jersey Certificates of
Participation, (MBIA),
6.125%, 2/15/19 1,864,962
Aaa AAA 2,225 University of Medicine
and Dentistry
Certificates of
Participation, (MBIA),
6.75%, 12/1/09 2,394,590
--------------
$ 19,428,769
--------------
INSURED SOLID WASTE - 0.4%
Aaa AAA $ 1,500 The Mercer County
Improvement Authority,
Solid Waste Revenue,
(AMT), (FGIC), 6.70%,
4/1/13 $ 1,544,070
--------------
INSURED TRANSPORTATION - 5.0%
Aaa AAA $ 2,750 Delaware River Port
Authority, (FGIC), 5.50%,
1/1/26 $ 2,645,308
Aaa AAA 3,500 Delaware River and Bay
Authority, (MBIA), 4.75%,
1/1/24 2,994,145
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA 5,000 New Jersey Turnpike
Authority "RITES",
(MBIA), Variable, 1/1/16
(1) 5,921,100
Aaa AAA 6,950 New Jersey Turnpike
Authority, (MBIA), 6.50%,
1/1/16 7,623,107
--------------
$ 19,183,660
--------------
INSURED UTILITIES - 3.0%
Aaa AAA $ 2,750 New Jersey Economic
Development Authority,
New Jersey American Water
Co., (AMT), (FGIC),
6.875%, 11/1/34 $ 2,981,110
Aaa AAA 8,930 Salem County, New Jersey,
Public Service Electric
and Gas, (MBIA), 5.55%,
11/1/33 8,371,071
--------------
$ 11,352,181
--------------
INSURED WATER & SEWER - 1.2%
Aaa AAA $ 2,500 Middlesex County
Utilities Authority,
Sewer Revenue (MBIA),
Variable, 8/15/10 (1) $ 2,704,400
Aaa AAA 1,850 West New York, New Jersey
Utility Authority,
(FGIC), 5.125%, 12/15/17 1,715,117
--------------
$ 4,419,517
--------------
LEASE/CERTIFICATE OF
PARTICIPATION - 3.9%
Baa1 A- $ 720 County of Atlantic, New
Jersey Public Facilities
Lease Agreement, 8.875%,
1/15/14 $ 945,684
Baa1 A- 785 County of Atlantic, New
Jersey Public Facilities
Lease Agreement, 8.875%,
1/15/15 1,028,350
A1 NR 1,000 Township of Bedminster,
New Jersey Board of
Education, 7.125%, 9/1/10 1,101,800
Aa AA- 2,000 Mercer County Improvement
Authority, Richard J.
Hughes Justice Complex,
6.05%, 1/1/15 2,002,340
Aa AA- 1,500 Mercer County Improvement
Authority, Richard J.
Hughes Justice Complex,
6.05%, 1/1/16 1,501,455
Aa AA- 1,500 Mercer County Improvement
Authority, Richard J.
Hughes Justice Complex,
6.05%, 1/1/17 1,501,455
Aa AA- 1,250 New Jersey Building
Authority, 7.20%, 6/15/13 1,331,688
Aa AA- 2,591 New Jersey Building
Authority, Garden State
Savings Bonds, 6/15/10 1,196,912
</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>
LEASE/CERTIFICATE OF
PARTICIPATION - (CONTINUED)
NR A+ 1,000 New Jersey Economic
Development Authority,
Performing Arts Center
Site Acquisition, 6.75%,
6/15/12 1,057,100
A1 A+ 1,650 New Jersey Economic
Development Authority,
Economic Recovery Fund,
0% 9/15/09 789,690
A1 A+ 5,500 New Jersey Economic
Development Authority,
Economic Recovery Fund,
0% 3/15/13 2,124,155
NR BBB 400 Puerto Rico Industrial,
Tourist, Educational,
Medical and Environmental
Control Authority,
Guaynabo Lease, 5.625%,
7/1/22 361,472
--------------
$ 14,942,101
--------------
LIFE CARE - 1.9%
NR NR $ 615 New Jersey Economic
Development Authority,
Cadbury Corporation,
7.50%, 7/1/21 $ 610,135
NR NR 300 New Jersey Economic
Development Authority,
Cadbury Corporation,
8.70%, 7/1/07 322,272
NR NR 2,000 New Jersey Economic
Development Authority,
Cadbury Corporation,
8.0%, 7/1/15 2,058,660
NR NR 4,000 New Jersey Economic
Development Authority,
Keswick Pines, 8.75%,
1/1/24 4,165,680
--------------
$ 7,156,747
--------------
MISCELLANEOUS - 2.1%
NR NR $ 7,600 New Jersey Sports and
Exposition Authority,
Monmouth Park, 8.00%,
1/1/25 $ 8,226,848
--------------
NURSING HOMES - 1.0%
NR NR $ 1,400 New Jersey Economic
Development Authority,
Claremont Health System,
9.17%, 9/1/22 $ 1,471,274
NR NR 2,500 New Jersey Economic
Development Authority,
Victoria Health, 7.65%,
1/1/14 2,345,125
--------------
$ 3,816,399
--------------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
SOLID WASTE - 4.3%
Ba NR $ 650 Mercer County Improvement
Authority, Solid Waste
System Revenue, 6.80%,
4/1/05 $ 630,942
Ba NR 5,975 Mercer County Improvement
Authority, Solid Waste
System Revenue, (AMT),
0%, 4/1/14 1,536,949
Ba NR 6,000 Mercer County Improvement
Authority, Solid Waste
System Revenue, (AMT),
0%, 4/1/15 1,429,140
Ba NR 3,000 Mercer County Improvement
Authority, Solid Waste
System Revenue, (AMT),
0%, 4/1/16 661,680
NR A- 11,930 Union County, New Jersey
Utilities Authority,
Solid Waste Revenue,
(AMT), 7.20%, 6/15/14 12,049,300
--------------
$ 16,308,011
--------------
SPECIAL TAX - 2.9%
Baa1 A $ 7,725 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 $ 7,174,439
Baa1 A 4,000 Puerto Rico Highway and
Transportation Authority,
5.00%, 7/1/36 3,411,960
Baa1 BBB+ 550 Puerto Rico
Infrastructure Financing
Authority, 7.90%, 7/1/07 590,288
--------------
$ 11,176,687
--------------
TRANSPORTATION - 12.4%
NR BBB $ 1,700 Guam Airport Authority,
(AMT), 6.60%, 10/1/10 $ 1,720,740
NR BBB 1,400 Guam Airport Authority,
6.50%, 10/1/23 1,412,320
NR BBB 2,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 2,031,160
A1 AA- 9,500 The Port Authority of New
York and New Jersey,
7.35%, 10/1/27 (2) 10,831,615
</TABLE>
51
<PAGE> 52
NEW JERSEY MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION - (CONTINUED)
A1 AA- 2,645 The Port Authority of New
York and New Jersey,
6.75%, 8/1/26 2,801,769
A1 AA- 5,000 The Port Authority of New
York and New Jersey,
(AMT), 6.25%, 1/15/27 5,056,000
A1 AA- 9,000 The Port Authority of New
York and New Jersey,
6.125%, 6/1/2094 9,174,870
A1 AA- 5,450 The Port Authority of New
York and New Jersey,
5.375%, 3/1/28 5,064,086
Baa2 BB+ 5,100 The Port Authority of New
York and New Jersey, Delta
Air Lines Inc., 6.95%,
6/1/08 5,401,614
Baa3 BB+ 3,900 New Jersey Economic
Development Authority,
American Airlines, (AMT),
7.10%, 11/1/31 4,044,222
-------------
$ 47,538,396
-------------
UTILITIES - 4.0%
NR BBB $ 100 Guam Power Authority,
5.25%, 10/1/13 $ 88,882
NR BBB 750 Guam Power Authority,
5.25%, 10/1/23 637,823
NR BBB 5,000 Guam Power Authority,
6.75%, 10/1/24 5,139,900
Baa2 BBB 625 New Jersey Economic
Development Authority,
Elizabethtown Gas Co.,
(AMT), 6.75%, 10/1/21 632,644
A2 A 1,455 New Jersey Economic
Development Authority,
Natural Gas Facilities,
7.05%, 3/1/16 1,525,277
Baa1 A- 2,000 Puerto Rico Electric Power
Authority, 5.50%, 7/1/16 1,911,400
NR NR 5,105 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 5,391,696
-------------
$ 15,327,622
-------------
WATER & SEWER - 2.4%
A1 AA- $ 2,000 Gloucester County
Utilities Authority,
6.50%, 1/1/21 $ 2,076,240
A3 A 4,500 New Jersey Economic
Development Authority,
Elizabethtown Water
Revenue, (AMT), 6.70%,
8/1/21 4,732,560
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aa AA 360 New Jersey Wastewater
Treatment Trust, 7.25%,
5/15/08 382,201
Aa AA 1,000 New Jersey Wastewater
Treatment Trust, 6.875%,
6/15/09 1,093,740
Aa AA 250 New Jersey Wastewater
Treatment Trust, 7.00%,
6/15/10 273,595
A1 AA 500 The Somerset Raritan
Valley Sewerage Authority
6.75%, 7/1/10 535,040
-------------
$ 9,093,376
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $364,577,774) $ 382,609,428
-------------
</TABLE>
- ----------------------------------------------------------------
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS - 0%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
600 30 year-U.S. Treasury
Bond, American, expiration
9/19/96, Strike Price
$106.00 (identified cost
$425,817) $ 196,875
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST,
$365,003,591) $ 382,806,303
===============
</TABLE>
(1) The above designated securities have been issued as inverse floater bonds.
(2) The above designated securities have 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 New Jersey
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 July 31, 1996, 22.2% 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 institution ranged from 0.3% to 12.2% of total investments.
See notes to financial statements.
52
<PAGE> 53
Pennsylvania Municipals Portfolio
Portfolio of Investments - July 31, 1996
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS - 99.9%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSISTED LIVING -- 2.9%
NR NR $ 2,680 Chester, Pennsylvania IDA
Senior Lifechoice of
Paoli, 8.05%, 1/1/24 $ 2,667,913
NR NR 5,000 Chester, Pennsylvania IDA
Senior Lifechoice of
Kimberton (AMT), 8.50%,
9/1/25 5,093,850
NR NR 5,000 Delaware, Pennsylvania IDA
Senior Quarters Project,
8.625%, 9/1/25 5,001,250
-------------
$ 12,763,013
-------------
COGENERATION -- 5.8%
NR NR $12,000 Pennsylvania EDA,
Northampton Generation
Project (AMT), 6.50%,
1/1/13 $ 11,396,640
NR BBB- 9,000 Pennsylvania EDA, Colver
Project, (AMT), 7.125%,
12/1/15 9,219,870
NR BBB- 5,000 Pennsylvania EDA, Colver
Project, (AMT), 7.15%,
12/1/18 5,112,700
-------------
$ 25,729,210
-------------
EDUCATION -- 3.0%
NR BBB $ 4,865 Erie Higher Education
Building Authority,
Mercyhurst College, 5.75%,
3/15/20 $ 4,320,315
Baa1 NR 1,500 Latrobe, Pennsylvania
Saint Vincent College,
6.75%, 5/1/24 1,514,700
NR AAA 2,000 Lehigh, Pennsylvania
Allentown College of
St. Francis, 6.75%,
12/15/12 2,137,040
NR BBB- 1,100 Lehigh, Pennsylvania Cedar
Crest College, 6.70%,
4/1/26 1,083,159
NR A- 4,225 Scranton-Lackawanna,
Pennsylvania, University
of Scranton, 6.40%, 3/1/07 4,386,184
-------------
$ 13,441,398
-------------
ESCROWED -- 6.8%
Aaa AAA $ 5,600 Berks, Pennsylvania
General Obligation,
(FGIC), Variable,
11/15/20, (1) $ 6,284,600
Aaa A- 1,750 Chester, Pennsylvania
HEFA, Bryn Mawr Hospitals,
6.75%, 7/1/14 1,951,932
Aaa AAA 2,000 Doylestown, Pennsylvania
Hospital Authority,
(AMBAC), 6.90%, 7/1/19 2,174,120
Aaa AAA 1,405 Lycoming, Pennsylvania
General Obligation,
(FGIC), 6.40%, 8/15/11 1,512,117
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA 945 Lycoming, Pennsylvania
General Obligation,
(FGIC), 6.40%, 8/15/11 1,017,047
NR A- 1,000 PA HEFA, Elizabeth
College, 7.25%, 6/15/11 1,124,150
NR A- 6,900 PA IDA, Economic
Development, 7.00%, 1/1/11 7,687,911
NR A- 5,155 PA Hospital & Higher
Education, Presbyterian
Medical Center, 6.50%,
12/1/11 5,683,594
Baa1 AAA 1,000 Puerto Rico Aqueduct &
Sewer, 7.90%, 7/1/07 1,091,680
Aaa AAA 5,000 Westmoreland, Pennsylvania
Muni Authority (FGIC), 0%,
8/15/20 1,208,000
Aaa AAA 500 York, Pennsylvania
Hospital Authority,
(AMBAC), 7.00%, 7/1/21 553,825
-------------
$ 30,288,976
-------------
GENERAL OBLIGATIONS -- 3.0%
NR A $ 3,000 Chester Upland,
Pennsylvania School
District, 6.375%, 9/1/21 $ 3,050,280
NR A 3,000 Dauphin, Pennsylvania,
6.90%, 6/2/26 3,212,760
A1 A+ 2,050 Lower Providence Township,
Pennsylvania Sewer
Authority, 6.75%, 5/1/22 2,239,666
NR A 1,950 McKeesport Area,
Pennsylvania School
District, 5.00%, 4/1/13 1,794,429
A1 AA- 465 Pennsylvania, 6.75%,
1/1/07 507,608
A1 AA- 500 Pennsylvania, 6.75%,
1/1/08 545,815
A1 AA- 2,000 Pennsylvania, 6.375%,
9/15/12 2,093,640
-------------
$ 13,444,198
-------------
HOSPITALS -- 19.0%
NR AAA $ 2,420 Allegheny, Pennsylvania
IDA, Presbyterian Medical
Center, 6.75%, 2/1/26 $ 2,508,983
Baa BBB 2,000 Dauphin, Pennsylvania
Community General
Osteopathic Hospital,
7.375%, 6/1/16 2,093,240
NR A- 10,250 Delaware, Pennsylvania
Riddle Memorial Hospital,
6.50%, 1/1/22 9,964,025
NR NR 4,620 Hazelton Luzerne,
Pennsylvania Saint Joseph
Medical Center, 8.375%,
7/1/12 4,780,961
A NR 2,670 Indiana, Pennsylvania
Indiana Hospital, 7.125%,
7/1/23 2,793,461
NR BBB+ 3,500 Lebanon, Pennsylvania Good
Samaritan Hospital, 6.00%,
11/15/18 3,199,280
</TABLE>
53
<PAGE> 54
PENNSYLVANIA MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - (CONTINUED)
A A 3,250 Lehigh, Pennsylvania
Muhlenberg Hospital,
6.60%, 7/15/22 3,265,730
NR BBB- 1,905 McKean, Pennsylvania
Bradford Hospital, 6.10%,
10/1/20 1,737,189
NR BBB- 3,500 McKean, Pennsylvania
Bradford Hospital, 6.00%,
10/1/13 3,218,600
Baa1 BBB+ 2,550 Monroeville, Pennsylvania
Forbes Health System,
6.25%, 10/1/15 2,475,005
NR BBB+ 2,615 Montgomery, Pennsylvania
Pottstown Medical Center,
6.875%, 11/15/20 2,624,231
Baa NR 1,375 Montgomery, Pennsylvania
Hospital, 6.60%, 7/1/10 1,381,628
A1 A+ 500 PA Hospital and Higher
Education, Allegheny
General Hospital, 7.25%,
9/1/17 535,495
A BBB+ 8,500 PA Hospital and Higher
Education, Albert Einstein
Medical Center, 7.625%,
4/1/11 9,015,270
Baa1 BBB+ 5,650 PA Hospital and Higher
Education. Graduate Health
System, 6.625%, 7/1/21 5,459,369
Baa1 BBB+ 7,115 PA Hospital and Higher
Education. Graduate Health
System, 7.25%, 7/1/18 7,246,770
Baa1 A- 10,015 PA Hospital and Higher
Education, Temple
University Hospital,
6.625%, 11/15/23 10,120,656
Aa AA 1,000 PA Hospital and Higher
Education, Children's
Hospital, 5.00%, 2/15/21 874,720
Baa NR 4,115 Somerset, Pennsylvania
Community Hospital
Project, 6.75%, 3/1/11 3,924,311
A NR 7,000 Washington, Pennsylvania
Monongahela Valley
Hospital 6.75%, 12/1/08 7,343,840
-------------
$ 84,562,764
-------------
HOUSING -- 7.7%
Aaa NR $ 2,175 Allegheny, Pennsylvania
SFMR, (GNMA), 7.15%,
6/1/17 $ 2,200,361
NR AAA 2,900 Allegheny, Pennsylvania
SFMR, Ladies Grand Army
Project, (FHA), 6.35%,
10/1/36 2,941,847
NR AAA 1,000 Bucks, Pennsylvania
Mortgage Revenue Bonds,
Warminster Heights
Project, (FHA), Section
8-A, 6.80%, 8/1/12 1,039,290
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
Aa AA+ 3,730 Pennsylvania HFA SFMR,
6.90%, 4/1/17 3,891,434
Aa AA+ 4,000 Pennsylvania HFA SFMR,
6.85%, 4/1/16 4,161,040
Aa AA 1,000 Pennsylvania HFA SFMR,
(AMT), Variable, 10/1/23,
(1) 1,072,820
Aa AA+ 8,350 Pennsylvania HFA SFMR,
(AMT), 7.50%, 10/1/25 9,019,837
Aaa NR 3,000 Philadelphia, Pennsylvania
Redevelopment Authority
MF, 6.95%, 5/15/24 3,144,090
A1 A 4,235 Urban Redevelopment
Authority of Pittsburgh
Mortgage, (AMT), 7.10%,
4/1/24 4,344,390
A1 A 265 Urban Redevelopment
Authority of Pittsburgh
Mortgage, 7.45%, 4/1/10 278,247
A1 A 1,000 Urban Redevelopment
Authority of Pittsburgh
Mortgage, 7.125%, 4/1/15 1,052,480
A1 A 1,055 Urban Redevelopment
Authority of Pittsburgh
Mortgage, (AMT), 7.40%,
4/1/24 1,096,282
-------------
$ 34,242,118
-------------
INDUSTRIAL DEVELOPMENT REVENUE/POLLUTION
CONTROL REVENUE -- 10.5%
A3 A $ 6,950 Butler, Pennsylvania IDA,
Witco Corporation Project,
5.85%, 12/1/23 $ 6,746,574
NR B+ 1,005 Clearfield, Pennsylvania
IDA, KMart Corporation,
6.80%, 5/15/07 955,594
NR A 4,000 Franklin, Pennsylvania
IDA, Corning Incorporated,
6.25%, 8/1/05 4,260,080
A2 A 12,000 New Morgan, Pennsylvania
IDA, New Morgan Landfill,
(AMT), 6.50%, 4/1/19 12,283,560
Baa2 BBB- 5,000 Pennsylvania IDA,
Macmilliam Project, (AMT),
7.60%, 12/1/20 5,497,250
Baa1 BBB+ 4,450 Pennsylvania IDA, Sun
Company Project, (AMT),
7.60%, 12/1/24 4,921,656
NR NR 6,500 Philadelphia IDA
Refrigerated Enterprises
Project, (AMT), 9.05%,
12/1/19 6,875,570
</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>
INDUSTRIAL DEVELOPMENT REVENUE/POLLUTION
CONTROL REVENUE -- CONTINUED
Baa3 BB+ 4,000 Puerto Rico Port Authority
American Airlines (AMT),
6.25%, 6/1/26 3,999,520
NR B- 1,105 Shamokin, Pennsylvania
IDA, KMart Corporation,
6.70%, 7/1/07 1,042,180
-------------
$ 46,581,984
-------------
INSURED EDUCATION -- 3.0%
Aaa AAA $ 2,000 Allegheny, Pennsylvania
Duquesne University
Project, (AMBAC), 5.00%,
3/1/21 $ 1,779,760
Aaa AAA 5,000 Cumberland, Pennsylvania
Messiah College Project,
5.125%, 10/1/15 4,628,650
Aaa AAA 1,000 PA Higher Education
Facilities, (AMBAC),
5.625%, 6/15/19 965,640
Aaa AAA 2,500 PA Higher Education
Student Loan, (AMBAC),
(AMT), 7.15%, 9/1/21 2,672,350
Aaa AAA 1,500 PA Higher Education
Student Loan, (AMBAC),
(AMT), Variable, 3/1/22,
(1) 1,472,475
Aaa AAA 700 PA Higher Education
Student Loan, (AMBAC),
(AMT), Variable, 9/1/26,
(1) 740,586
Aaa AAA 1,000 Union, Pennsylvania
Bucknell University,
(MBIA), 5.50%, 4/1/16 966,140
-------------
$ 13,225,601
-------------
INSURED GENERAL OBLIGATION -- 9.3%
Aaa AAA $ 2,500 Berks, Pennsylvania, 0%,
(FGIC), 5/15/18 $ 685,550
Aaa AAA 5,400 Conrad Weiser Area,
Pennsylvania School
District, (MBIA), 5.25%,
12/15/14 5,089,986
Aaa AAA 2,170 Elizabeth Forward,
Pennsylvania School
District, (MBIA), 0%,
9/1/20 539,028
Aaa AAA 2,170 Elizabeth Forward,
Pennsylvania School
District, (MBIA), 0%,
9/1/21 502,572
Aaa AAA 2,170 Elizabeth Forward,
Pennsylvania School
District, (MBIA), 0%,
9/1/22 474,080
Aaa AAA 2,170 Elizabeth Forward,
Pennsylvania School
District, (MBIA), 0%,
9/1/23 447,215
Aaa AAA 4,345 Elizabeth Forward,
Pennsylvania School
District, (MBIA), 0%,
9/1/24 844,711
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
Aaa AAA 10,000 Erie, Pennsylvania School
District, (MBIA), 5.75%,
5/1/26 9,956,600
Aaa AAA 2,500 Erie, Pennsylvania School
District, (MBIA), 0%,
5/1/19 663,425
Aaa AAA 2,625 Erie, Pennsylvania School
District, (MBIA), 0%,
5/1/20 657,116
Aaa AAA 2,625 Erie, Pennsylvania School
District, (MBIA), 0%,
5/1/21 612,491
Aaa AAA 3,625 Erie, Pennsylvania School
District, (MBIA), 0%,
5/1/22 797,500
Aaa AAA 7,500 Keystone Oaks,
Pennsylvania School
District, (AMBAC),
Variable, 9/01/16, (1) 7,438,650
Aaa AAA 1,430 Mars Area, Pennsylvania
School District, (MBIA),
0%, 3/1/14 512,112
Aaa AAA 1,900 Philadelphia,
Pennsylvania, (MBIA),
5.00%, 5/15/15 1,737,474
Aaa AAA 3,200 Philadelphia,
Pennsylvania, (MBIA),
5.00%, 5/15/20 2,871,680
Aaa AAA 4,435 Philadelphia, Pennsylvania
School District, (AMBAC),
5.50%, 9/1/25 4,248,907
Aaa AAA 655 Rochester Area,
Pennsylvania School
District, (AMBAC), 0%,
5/1/10 302,618
Aaa AAA 2,795 Venango, Pennsylvania,
(AMBAC), 6.30%, 12/1/19 2,866,300
-------------
$ 41,248,015
-------------
INSURED HOSPITAL -- 5.2%
Aaa AAA $ 1,170 Allegheny, Pennsylvania
Children's Hospital of
Pittsburgh, (MBIA), 6.75%,
7/1/08, (2) $ 1,236,655
Aaa AAA 3,750 Allegheny, Pennsylvania
Magee-Womens Hospital,
(FGIC), 0%, 10/1/15 1,203,938
Aaa AAA 1,400 Armstrong, Pennsylvania
Saint Francis Health Care,
(AMBAC), 6.25%, 6/1/13 1,447,908
Aaa AAA 2,500 Armstrong, Pennsylvania
Saint Francis Health Care,
(AMBAC), 6.00%, 8/15/08 2,573,450
Aaa AAA 775 Carbon, Pennsylvania
Gnaden Memorial Hospital,
(AMBAC), 7.00%, 11/15/14 826,382
Aaa AAA 750 Erie, Pennsylvania Harlot
Medical Center, (AMBAC),
7.10%, 2/15/10 813,322
Aaa AAA 230 Lehigh, Pennsylvania
Health East, Incorporated,
(MBIA), 7.00%, 7/1/15 244,847
Aaa AAA 5,000 Lehigh, Pennsylvania St.
Luke's Hospital, (AMBAC),
6.25%, 7/1/22 5,112,100
</TABLE>
55
<PAGE> 56
PENNSYLVANIA MUNICIPALS PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
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 HOSPITAL - (CONTINUED)
Aaa AAA 1,000 Montgomery, Pennsylvania
Abington Memorial,
(AMBAC), Variable, 6/1/11
(1) 1,106,350
Aaa AAA 5,000 Philadelphia Hospital &
Higher Education, PA
Hospital, (FGIC),
Variable, 2/15/12 (1) 4,530,950
Aaa AAA 1,500 Scranton-Lackawanna,
Pennsylvania Mercy Health,
(MBIA), 6.90%, 1/1/23 1,580,145
Aaa AAA 2,550 Washington, Pennsylvania
Shadyside Hospital,
(AMBAC), 5.75%, 12/15/14 2,526,973
-------------
$ 23,203,020
-------------
INSURED IDR/IDB -- 0.2%
Aaa AAA $ 1,000 Delaware, Pennsylvania IDR
Philadelphia Water,
(FGIC), 6.35%, 8/15/25 $ 1,030,350
-------------
INSURED LEASE -- 3.4%
Aaa AAA $ 4,595 Harrisburg-Dauphin,
Pennsylvania Lease
Revenue, (CGIC), 6.25%,
6/1/10 $ 4,894,548
Aaa AAA 3,000 Northumberland,
Pennsylvania Lease
Revenue, (MBIA), 0%,
10/15/12 1,194,120
Aaa AAA 10,000 Commonwealth of
Pennsylvania, Lease
Revenue, (AMBAC), 5.00%,
7/1/15 (2) 9,013,700
-------------
$ 15,102,368
-------------
INSURED SPECIAL TAX -- 0.9%
Aaa AAA $ 4,295 PA Intergovernmental
Special Tax, (MBIA),
5.00%, 6/15/22 $ 3,790,295
-------------
INSURED UTILITIES -- 5.6%
Aaa AAA $ 4,000 Beaver, Pennsylvania IDA,
Ohio Edison Company,
(FGIC), 7.00%, 6/1/21 $ 4,282,360
Aaa AAA 10,000 Beaver, Pennsylvania IDA,
Ohio Edison Company,
(FGIC), 7.05%, 10/1/20 10,818,500
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
Aaa AAA 3,800 Puerto Rico Electric Power
Authority, (FSA),
Variable, 7/1/02, (1) 4,109,890
Aaa AAA 5,550 Lehigh, Pennsylvania IDA,
PA Power & Light Company,
(MBIA), 6.15%, 8/1/29 5,643,018
-------------
$ 24,853,768
-------------
INSURED WATER & SEWER -- 2.5%
Aaa AAA $ 2,235 Bethlehem, Pennsylvania
Water Authority, (MBIA),
5.20%, 11/15/21 $ 2,041,516
Aaa AAA 2,500 Philadelphia, Pennsylvania
Water & Wastewater,
(FGIC), Variable, 6/15/12
(1) 2,416,950
Aaa AAA 3,500 Philadelphia, Pennsylvania
Water & Wastewater,
(MBIA), 5.00%, 6/15/17 3,116,855
Aaa AAA 3,960 Philadelphia, Pennsylvania
Water & Wastewater,
(CGIC), 5.00%, 6/15/16 3,558,773
-------------
$ 11,134,094
-------------
LIFE CARE -- 0.9%
NR NR $ 4,050 Delaware, Pennsylvania
White Horse Village,
7.50%, 7/1/18 $ 4,062,191
-------------
NURSING HOMES -- 2.2%
NR NR $ 3,500 Montgomery, Pennsylvania
IDA Geriatric Health
8.375%, 7/1/23 $ 3,629,325
NR NR 1,190 Philadelphia, Pennsylvania
Hospital - Protestant
Homes, 8.625%, 7/1/21 1,229,354
NR NR 1,460 Westmoreland, Pennsylvania
Highland Health, 9.25%,
6/1/22 1,536,854
NR NR 2,750 Wilkins Area, Pennsylvania
IDA Fairview Extended
Care, 10.25%, 1/1/21 3,118,555
-------------
$ 9,514,088
-------------
</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>
POOLED LOAN -- 4.2%
NR AA+ $ 870 Pennsylvania
Infrastructure Investment
Authority, Pennvest,
6.80%, 9/1/10 $ 956,774
NR A 16,950 Pennsylvania Finance
Authority, Beaver County,
6.60%, 11/1/09 17,870,046
-------------
$ 18,826,820
-------------
SPECIAL TAX REVENUE -- 0.1%
Baa1 BBB+ $ 500 Puerto Rico Special Tax
Revenue, 7.50%, 7/1/09 $ 533,025
-------------
UTILITIES -- 3.7%
Baa3 BB+ $ 500 Beaver, Pennsylvania IDA,
Ohio Edison Company,
7.75%, 9/1/24 $ 528,480
Baa1 BBB+ 3,250 Delaware, Pennsylvania
IDA, Philadelphia Electric
Company, 7.375%, 4/1/21 3,467,230
Baa1 BBB+ 4,070 Montgomery, Pennsylvania
IDA, Philadelphia Electric
Co, (AMT), 7.60%, 4/1/21 4,342,812
Baa1 A- 3,370 Puerto Rico Electric Power
Authority Power Revenue,
0%, 7/1/17 967,392
NR NR 1,500 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 1,584,240
A2 A 5,500 Washington, Pennsylvania
IDA West Penn Power
Company, 6.05%, 4/1/14 5,555,385
-------------
$ 16,445,539
-------------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $428,564,003) $ 444,022,835
----------
</TABLE>
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS - 0.1%
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
408 30 year-U.S. Treasury
Bond, American expiration
9/19/96, Strike Price
$104.00 $ 38,063
451 30 year-U.S. Treasury
Bond, American expiration
9/19/96, Strike Price
$106.00 147,984
-------------
TOTAL PUT OPTIONS ON
FINANCIAL FUTURES
CONTRACTS (IDENTIFIED
COST, $695,941) $ 186,047
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST,
$429,259,944) $ 444,208,882
=============
</TABLE>
(1) The above designated securities have been issued as inverse floater bonds.
(2) Security has been segregated to cover margin requirements for 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 Pennsylvania
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, July 31, 1996, 37.8% 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 institution ranged from 10.9% to 14.4% of total investments.
See notes to financial statements
57
<PAGE> 58
Texas Municipals Portfolio
Portfolio of Investments -- July 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 - 3.7%
Aa1 AA+ $ 170 University of Texas,
6.75%, 8/15/13 $ 184,858
A NR 700 Brazos Texas Higher
Education Authority,
(AMT), 6.50%, 6/1/04 735,322
----------
$ 920,180
----------
ELECTRIC UTILITIES - 1.7%
NR BBB $ 500 Guam Power Authority,
5.25%, 10/1/23 $ 425,215
----------
ESCROWED - 4.4%
NR NR $ 200 Bexar County, Texas, St.
Luke's Lutheran Hospital,
7.00%, 5/1/21 $ 229,848
Aaa NR 1,000 Central Texas Housing
Corporation Single Family,
0%, 9/1/16 293,580
Aaa AAA 85 Harris County Texas Toll
Road Unlimited Tax and
Subordinate Lien, (AMBAC) 89,049
6.625%, 8/15/17
Aaa AAA 200 Montgomery County, Texas
Hospital District (FSA),
6.625%, 4/1/17 221,142
Aaa AAA 150 Texas National Research
Lab Super Collider, 6.95%,
12/1/12 170,423
AAA AAA 80 University of Texas
Revenue Bonds, 6.75%,
8/15/13 88,419
----------
$ 1,092,461
----------
GENERAL OBLIGATIONS - 12.6%
Aaa AAA $ 1,000 Bastrop, Texas Independent
School District U.T.G.O.
(PSF), 0%, 2/15/13 $ 382,490
Aaa AAA 1,000 Cypress-Fairbanks, Texas
Independent School
District U.T.G.O. (PSF),
5.25%, 2/15/19 925,390
Aaa AAA 550 Grand Prairie, Texas
Independent School
District U.T.G.O. (PSF),
0%, 2/15/12 224,653
NR NR 500 Leander, Texas L.T.G.O
6.75%, 8/15/16 505,795
Aa AA 690 Texas Veterans' Housing
Assistance U.T.G.O. (AMT),
6.70%, 12/1/24 706,353
Aa AA 375 Texas Veterans' Housing
Assistance U.T.G.O. (AMT),
6.80%, 12/1/23 386,156
----------
$ 3,130,837
----------
HEALTH CARE - 6.2%
NR NR $ 500 Bell County, Texas HFC
Elder Care Facilities,
9.00%, 11/1/24 $ 533,065
Aa NR 975 Port Arthur Texas, Health
Facilities, (FHA), 6.50%,
8/1/24 992,862
----------
$ 1,525,927
----------
<CAPTION>
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
HOSPITALS - 10.1%
NR BBB $ 500 Denison, Texas, Texoma
Medical Center, 7.10%,
8/15/24 $ 510,395
A A- 100 Ector County, Texas
Hospital District, 7.30%,
4/15/12 108,517
A A- 100 Harris County, Texas
Hospital District,
Memorial Hospital, 7.125%,
6/1/15 106,662
NR BBB- 600 Lufkin Texas, Memorial
Health Systems of East
Texas, 6.875%, 2/15/26 599,604
Aa AA 250 McAllen Health Facilities,
Texas, Sisters of Mercy,
5.00%, 6/1/15 220,975
A NR 1,000 Tarrant County, Texas,
Methodist Health System,
6.00%, 9/1/24 969,620
----------
$ 2,515,773
----------
HOUSING - 9.4%
NR A $ 750 Travis County, Texas HFC
Multifamily Travis Station
Apartments, 6.75%, 4/1/19 $ 777,345
NR AAA 500 Dallas Texas HFC (GNMA)
7.95%, 12/1/23 (1) 532,250
NR AAA 150 North Central Texas HFC
(GNMA), 7.875%, 10/1/22 159,460
Aaa AAA 55 Puerto Rico HFC, Single
Family Mortgage Revenue
Bonds, (GNMA), 57,627
6.85%, 10/15/23
NR AAA 750 Travis County, Texas HFC,
(GNMA/FNMA), 7.05%,
12/1/25 796,875
----------
$ 2,323,557
----------
INDUSTRIAL DEVELOPMENT
REVENUE/POLLUTION CONTROL
REVENUE - 13.2%
Baa2 BBB $ 500 Alliance Airport Authority
Texas, (Federal Express),
(AMT), 6.375%, 4/1/21 $ 490,510
Baa1 BBB 450 Gulf Coast, Texas Waste
Disposal Authority,
(Champion International)
(AMT), 7.25%, 4/1/17 476,136
A2 A+ 1,000 Port Corpus Christi,
Texas, (Hoechst Celanese
Corp.), (AMT), 6.875%,
4/1/17 (3) 1,052,350
Baa3 BB+ 250 Puerto Rico Port
Authority, (American Air
Lines), (AMT), 6.30%,
6/1/23 250,810
</TABLE>
58
<PAGE> 59
- --------------------------------------------------------------------------------
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)
NR A 1,000 Trinity River Authority
Texas, (PCR), (AMT),
6.20%, 3/1/20 1,001,570
----------
$ 3,271,376
----------
INSURED ELECTRIC UTILITIES - 17.9%
Aaa AAA $ 1,000 Austin, Texas Utility
System (FGIC), 6.25%,
5/15/16 $ 1,035,140
Aaa AAA 1,050 Corpus Christi, Texas
Utility System (MBIA),
5.20%, 7/15/13 990,129
Aaa AAA 500 Lower Colorado River
Authority Junior Lien,
Texas (FGIC), 0%, 1/1/12 203,835
Aaa AAA 1,000 Austin Texas Combined
Utility, (AMBAC), 6.70%,
11/15/12 (2) 1,054,690
Aaa AAA 1,395 Texas Municipal Power
Agency (MBIA), 0%, 9/1/13 511,839
Aaa AAA 1,000 Texas Municipal Power
Agency (MBIA), 0%, 9/1/17 281,320
Aaa AAA 250 Brazos River Authority,
Houston Light & Power
(FGIC), 7.20%, 12/01/18 269,822
Aaa AAA 75 Brazos River Authority,
Houston Light & Power
(AMBAC), 6.70%, 3/01/17 81,088
----------
$ 4,427,863
----------
INSURED HOSPITAL - 6.3%
Aaa AAA $ 500 Harris County, Texas HFC
Hermann Hospital (MBIA),
6.375%, 10/1/24 (3) $ 519,450
Aaa AAA 1,000 Tyler County, Texas HFC
Mother Frances Hospital
(FGIC), 6.50%, 7/1/22 1,038,040
----------
$ 1,557,490
----------
INSURED TRANSPORTATION - 5.7%
Aaa AAA $ 1,500 Harris County, Texas Toll
Road Subordinate Lien
(FGIC), 5.375%, 8/15/20 $ 1,412,325
----------
LEASE/COP - 1.0%
NR BBB- $ 250 Rio Grande, Texas
Independent School
District Lease, 6.75%,
7/15/10 $ 254,523
----------
RATINGS
(UNAUDITED)
- ------------------ PRINCIPAL
AMOUNT
STANDARD (000
MOODY'S & POOR'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------
MISCELLANEOUS - 0.2%
NR NR $ 242 Retama Development, Texas,
Retama Racetrack, 8.75%,
12/15/18 (4) $ 47,157
----------
TRANSPORTATION - 7.6%
Baa2 BB+ $ 505 Alliance Airport
Authority, American
Airlines, (AMT) 7.50%,
12/1/29 $ 535,275
Baa3 BB 300 Dallas-Fort Worth Texas
Airport, Delta Airlines
(AMT), 7.125%, 11/1/26 310,047
Baa2 BB+ 225 Dallas-Fort Worth Texas
Airport, American Airlines
(AMT), 7.50%, 11/1/25 239,112
NR BBB 755 Guam Airport Authority
(AMT), 6.70%, 10/1/23 766,763
Aa AA 25 Harris County, Texas Toll
Road, Subordinate Lien,
6.75%, 8/1/14 27,059
----------
$ 1,878,256
----------
TOTAL TAX-EXEMPT
INVESTMENTS (IDENTIFIED
COST, $24,136,847) $ 24,782,940
==========
</TABLE>
(1) Security has been segregated to cover margin requirements for open financial
futures contracts.
(2) When-issued security.
(3) The above designated securities have been segregated to cover when-issued
securities.
(4) Defaulted Security.
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 Texas
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 July 31, 1996, 35.1% 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 institution ranged from 0.7% to 16.0% of total investments.
See notes to financial statements
59
<PAGE> 60
Municipals Portfolios
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $125,151,785 $42,777,307 $185,036,490 $166,177,298
Unrealized appreciation 5,492,753 1,637,766 2,049,123 6,044,030
------------ ----------- ------------ ------------
Total investments, at value (Note 1A) $130,644,538 $44,415,073 $187,085,613 $172,221,328
Cash 442 116,328 110,267 364
Receivable for investments sold -- 1,073,556 -- --
Interest receivable 1,301,075 603,593 2,495,183 2,800,095
Deferred organization expenses (Note 1D) 2,679 846 4,195 4,001
------------ ----------- ------------ ------------
Total assets $131,948,734 $46,209,396 $189,695,258 $175,025,788
------------ ----------- ------------ ------------
LIABILITIES:
Payable for investments purchased $ -- $ 750,000 $ 1,906,920 $ --
Payable for when-issued securities (Note 1G) 1,456,071 -- -- --
Payable for daily variation margin on open
financial futures contracts (Note 1E) 123,750 41,250 156,750 165,000
Demand note payable (Note 5) 496,000 -- -- 1,381,000
Payable to affiliate --
Trustees' fees (Note 2) 730 137 942 950
Accrued expenses 10,636 2,435 13,761 14,230
------------ ----------- ------------ ------------
Total liabilities $ 2,087,187 $ 793,822 $ 2,078,373 $ 1,561,180
------------ ----------- ------------ ------------
NET ASSETS applicable to investors' interest in
Portfolio $129,861,547 $45,415,574 $187,616,885 $173,464,608
============ =========== ============ ============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $124,726,935 $43,823,918 $185,675,627 $167,897,449
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of
identified cost) 5,134,612 1,591,656 1,941,258 5,567,159
------------ ----------- ------------ ------------
Total $129,861,547 $45,415,574 $187,616,885 $173,464,608
============ =========== ============ ============
</TABLE>
See notes to financial statements
60
<PAGE> 61
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments --
Identified cost $71,085,286 $365,003,591 $429,259,944 $24,136,847
Unrealized appreciation 3,358,379 17,802,712 14,948,938 646,093
----------- ------------ ------------ -----------
Total investments, at value (Note 1A) $74,443,665 $382,806,303 $444,208,882 $24,782,940
Cash 691,301 955,112 309 239,412
Receivable for investments sold 40,239 2,809,723 548,341 --
Interest receivable 992,257 4,978,076 6,376,451 426,391
Deferred organization expenses (Note 1D) 1,328 6,794 8,266 811
----------- ------------ ------------ -----------
Total assets $76,168,790 $391,556,008 $451,142,249 $25,449,554
----------- ------------ ------------ -----------
LIABILITIES:
Payable for investments purchased $ -- $ 5,038,716 $ 1,365,540 $ --
Payable for when issued securities (Note 1G) -- -- -- 1,046,570
Payable for daily variation margin on open
financial futures contracts (Note 1E) 72,188 252,188 419,375 31,625
Demand note payable (Note 5) -- -- 1,169,000 --
Payable to affiliate --
Trustees' fees (Note 2) 560 1,435 1,610 138
Accrued expenses 5,969 19,328 4,863 4,385
----------- ------------ ------------ -----------
Total liabilities $ 78,717 $ 5,311,667 $ 2,960,388 $ 1,082,718
----------- ------------ ------------ -----------
NET ASSETS applicable to investors' interest in
Portfolio $76,090,073 $386,244,341 $448,181,861 $24,366,836
=========== ============ ============ ===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $72,808,503 $368,629,668 $434,444,969 $23,732,927
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of
identified cost) 3,281,570 17,614,673 13,736,892 633,909
----------- ------------ ------------ -----------
Total $76,090,073 $386,244,341 $448,181,861 $24,366,836
=========== ============ ============ ===========
</TABLE>
See notes to financial statements
61
<PAGE> 62
FINANCIAL STATEMENTS (continued)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income $8,409,663 $2,867,274 $11,705,682 $11,159,400
---------- ---------- ----------- -----------
Expenses --
Investment adviser fee (Note 2) $ 574,999 $ 130,068 $ 841,092 $ 795,032
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,346 1,634 11,414 10,957
Custodian fees (Note 1I) 77,373 29,415 103,536 109,471
Legal and accounting services 27,328 24,418 31,899 34,696
Amortization of organization expenses (Note 1D) 1,797 618 2,628 2,500
Miscellaneous 26,220 11,843 24,076 55,985
---------- ---------- ----------- -----------
Total expenses $ 716,063 $ 197,996 $1,014,645 $ 1,008,641
---------- ---------- ----------- -----------
Deduct --
Reduction of investment adviser fee (Note 2) $ -- $ 7,886 $ -- $ --
Reduction of custodian fee (Note 1I) 17,032 20,508 30,601 37,024
---------- ---------- ----------- -----------
Total $ 17,032 $ 28,394 $ 30,601 $ 37,024
---------- ---------- ----------- -----------
Net expenses $ 699,031 $ 169,602 $ 984,044 $ 971,617
---------- ---------- ----------- -----------
Net investment income $7,710,632 $2,697,672 $10,721,638 $10,187,783
---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 750,483 $ 454,314 $ 317,050 $ 2,444,619
Financial futures contracts 151,281 (154,883) (317,864 ) 366,370
---------- ---------- ----------- -----------
Net realized gain (loss) on investments $ 901,764 $ 299,431 $ (814 ) $ 2,810,989
---------- ---------- ----------- -----------
Change in unrealized appreciation (depreciation) --
Investments $1,664,131 $ 478,339 $3,603,459 $ 1,583,815
Financial futures contracts (406,568) (76,087) (219,324 ) (612,570)
---------- ---------- ----------- -----------
Net unrealized appreciation (depreciation) of
investments $1,257,563 $ 402,252 $3,384,135 $ 971,245
---------- ---------- ----------- -----------
Net realized and unrealized gain on investments $2,159,327 $ 701,683 $3,383,321 $ 3,782,234
---------- ---------- ----------- -----------
Net increase in net assets from operations $9,869,959 $3,399,355 $14,104,959 $13,970,017
========== ========== =========== ===========
</TABLE>
See notes to financial statements
62
<PAGE> 63
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income $4,973,180 $25,580,109 $30,695,125 $1,648,060
---------- ----------- ----------- ----------
Expenses --
Investment adviser fee (Note 2) $ 295,178 $1,878,801 $ 2,262,320 $ 55,086
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 6,347 19,671 19,137 1,633
Custodian fees (Note 1I) 46,741 174,839 202,018 20,008
Legal and accounting services 22,396 40,228 43,328 21,528
Amortization of organization expenses (Note 1D) 1,180 4,476 5,292 604
Miscellaneous 18,325 41,571 48,193 14,394
---------- ----------- ----------- ----------
Total expenses $ 390,167 $2,159,586 $ 2,580,288 $ 113,253
---------- ----------- ----------- ----------
Deduct --
Reduction of investment adviser fee (Note 2) $ -- $ -- $ -- $ 27,295
Reduction of custodian fee (Note 1I) 18,630 67,792 202,018 13,141
---------- ----------- ----------- ----------
Total $ 18,630 $ 67,792 $ 202,018 $ 40,436
---------- ----------- ----------- ----------
Net expenses $ 371,537 $2,091,794 $ 2,378,270 $ 72,817
---------- ----------- ----------- ----------
Net investment income $4,601,643 $23,488,315 $28,316,855 $1,575,243
---------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 719,074 $ (586,976 ) $ 4,460,770 $ 279,941
Financial futures contracts (308,277 ) 270,248 1,531,445 62,357
---------- ----------- ----------- ----------
Net realized gain (loss) on investments $ 410,797 $ (316,728 ) $ 5,992,215 $ 342,298
---------- ----------- ----------- ----------
Change in unrealized appreciation (depreciation) --
Investments $ 788,314 $4,160,055 $ 967,735 $ 224,595
Financial futures contracts (91,306 ) (233,343 ) (1,212,046 ) (45,957)
---------- ----------- ----------- ----------
Net unrealized appreciation (depreciation) of
investments $ 697,008 $3,926,712 $ (244,311 ) $ 178,638
---------- ----------- ----------- ----------
Net realized and unrealized gain on investments $1,107,805 $3,609,984 $ 5,747,904 $ 520,936
---------- ----------- ----------- ----------
Net increase in net assets from operations $5,709,448 $27,098,299 $34,064,759 $2,096,179
========== =========== =========== ==========
</TABLE>
See notes to financial statements
63
<PAGE> 64
FINANCIAL STATEMENTS (continued)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 7,710,632 $ 2,697,672 $10,721,638 $ 10,187,783
Net realized gain (loss) on investment
transactions 901,764 299,431 (814 ) 2,810,989
Change in unrealized appreciation of investments 1,257,563 402,252 3,384,135 971,245
------------ ------------ ------------- ------------
Net increase in net assets from operations $ 9,869,959 $ 3,399,355 $14,104,959 $ 13,970,017
------------ ------------ ------------- ------------
Capital transactions --
Contributions $ 9,272,110 $ 5,588,344 $11,976,667 $ 7,755,466
Withdrawals (33,801,537) (9,649,291) (33,740,530 ) (39,523,856)
------------ ------------ ------------- ------------
Decrease in net assets resulting from capital
transactions $(24,529,427) $ (4,060,947) $(21,763,863) $(31,768,390)
------------ ------------ ------------- ------------
Total decrease in net assets $(14,659,468) $ (661,592) $(7,658,904 ) $(17,798,373)
NET ASSETS:
At beginning of year 144,521,015 46,077,166 195,275,789 191,262,981
------------ ------------ ------------- ------------
At end of year $129,861,547 $ 45,415,574 $187,616,885 $173,464,608
============ ============ ============= ============
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 4,601,643 $ 23,488,315 $28,316,855 $ 1,575,243
Net realized gain (loss) on investment
transactions 410,797 (316,728) 5,992,215 342,298
Change in unrealized appreciation (depreciation)
of investments 697,008 3,926,712 (244,311 ) 178,638
------------ ------------ ------------- ------------
Net increase in net assets from operations $ 5,709,448 $ 27,098,299 $34,064,759 $ 2,096,179
------------ ------------ ------------- ------------
Capital transactions --
Contributions $ 5,070,544 $ 25,074,635 $20,910,102 $ 1,285,449
Withdrawals (17,657,615) (76,967,015) (109,043,304) (7,241,813)
------------ ------------ ------------- ------------
Decrease in net assets resulting from capital
transactions $(12,587,071) $(51,892,380) $(88,133,202) $ (5,956,364)
------------ ------------ ------------- ------------
Total decrease in net assets $ (6,877,623) $(24,794,081) $(54,068,443) $ (3,860,185)
NET ASSETS:
At beginning of year 82,967,696 411,038,422 502,250,304 28,227,021
------------ ------------ ------------- ------------
At end of year $ 76,090,073 $386,244,341 $448,181,861 $ 24,366,836
============ ============ ============= ============
</TABLE>
See notes to financial statements
64
<PAGE> 65
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended July 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 8,611,581 $ 2,800,174 $ 11,005,611 $ 11,377,793
Net realized loss on investment transactions (5,872,496) (2,521,981) (5,335,034) (6,232,336)
Change in unrealized appreciation of investments 7,857,458 2,823,551 4,533,624 6,947,077
------------ ------------ ------------ ------------
Net increase in net assets from operations $ 10,596,543 $ 3,101,744 $ 10,204,201 $ 12,092,534
------------ ------------ ------------ ------------
Capital transactions --
Contributions $ 21,272,707 $ 10,355,365 $ 25,911,862 $ 14,779,804
Withdrawals (41,416,595) (11,778,902) (32,878,239) (39,641,020)
------------ ------------ ------------ ------------
Decrease in net assets resulting from capital
transactions $(20,143,888) $ (1,423,537) $ (6,966,377) $(24,861,216)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets $ (9,547,345) $ 1,678,207 $ 3,237,824 $(12,768,682)
NET ASSETS:
At beginning of year 154,068,360 44,398,959 192,037,965 204,031,663
------------ ------------ ------------ ------------
At end of year $144,521,015 $ 46,077,166 $ 195,275,789 $191,262,981
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 4,867,333 $ 24,622,808 $ 30,623,550 $ 1,690,403
Net realized loss on investment transactions (5,215,244) (17,774,510) (20,294,984) (1,003,751)
Change in unrealized appreciation of investments 4,768,674 16,631,954 19,002,225 1,220,058
------------ ------------ ------------ -----------
Net increase in net assets from operations $ 4,420,763 $ 23,480,252 $ 29,330,791 $ 1,906,710
------------ ------------ ------------ -----------
Capital transactions --
Contributions $ 11,350,380 $ 43,487,001 $ 38,709,755 $ 4,736,724
Withdrawals (16,808,817) (79,782,847) (102,576,381) (6,005,420)
------------ ------------ ------------ -----------
Decrease in net assets resulting from capital
transactions $ (5,458,437) $(36,295,846) $ (63,866,626) $ (1,268,696)
------------ ------------ ------------ -----------
Total increase (decrease) in net assets $ (1,037,674) $(12,815,594) $ (34,535,835) $ 638,014
NET ASSETS:
At beginning of year 84,005,370 423,854,016 536,786,139 27,589,007
------------ ------------ ------------ -----------
At end of year $ 82,967,696 $411,038,422 $ 502,250,304 $ 28,227,021
============ ============ ============ ===========
</TABLE>
See notes to financial statements
65
<PAGE> 66
FINANCIAL STATEMENTS (continued)
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARIZONA PORTFOLIO COLORADO PORTFOLIO
--------------------------------------------------- -------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------ YEAR ENDED ---------------------------------- 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) 0.51% 0.52% 0.46%+ 0.42%+ 0.40% 0.25% 0.02%+ 0.06%+
Net expenses
after
custodian fee
reduction 0.50% -- -- -- 0.36% -- -- --
Net investment
income 5.53% 5.81% 5.43%+ 5.46%+ 5.75% 6.05% 5.73%+ 5.60%+
PORTFOLIO
TURNOVER 18% 22% 23% 107% 53% 52% 23% 10%
NET ASSETS, end
of year
(000 omitted) $129,862 $144,521 $154,068 $133,539 $ 45,416 $ 46,077 $ 44,399 $ 24,346
</TABLE>
++The operating expenses of the Colorado Portfolio may reflect a reduction of
the investment adviser fee and/or 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) 0.42% 0.40% 0.35%+ 0.35%+
Expenses after custodian fee reduction 0.38% -- -- --
Net investment income 5.73% 5.90% 5.40%+ 5.31%+
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONNECTICUT PORTFOLIO MICHIGAN PORTFOLIO
--------------------------------------------------- -------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------ YEAR ENDED ---------------------------------- 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) 0.52% 0.53% 0.47%+ 0.46%+ 0.54% 0.48% 0.47%+ 0.44%+
Net expenses
after
custodian fee
reduction 0.50% -- -- -- 0.52% -- -- --
Net investment
income 5.49% 5.77% 5.40%+ 5.45%+ 5.50% 5.85% 5.48%+ 5.46%+
PORTFOLIO
TURNOVER 23% 29% 10% 10% 49% 54% 45% 20%
NET ASSETS, end
of year
(000 omitted) $187,617 $195,276 $192,038 $159,848 $173,465 $191,263 $204,032 $187,665
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
(1) The expense ratios for the year ended July 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 July 31, 1995 have not been
adjusted to reflect this change.
See notes to financial statements
66
<PAGE> 67
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINNESOTA PORTFOLIO NEW JERSEY PORTFOLIO
--------------------------------------------------- -------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------ YEAR ENDED ---------------------------------- 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) 0.48% 0.47% 0.45%+ 0.40%+ 0.53% 0.52% 0.50%+ 0.50%+
Net expenses
after
custodian fee
reduction 0.46% -- -- -- 0.52% -- -- --
Net investment
income 5.69% 5.83% 5.50%+ 5.58%+ 5.82% 5.96% 5.62%+ 5.67%+
PORTFOLIO
TURNOVER 45% 76% 20% 10% 39% 54% 25% 12%
NET ASSETS, end
of year
(000 omitted) $ 76,090 $ 82,968 $ 84,005 $ 67,019 $386,244 $411,038 $423,854 $393,677
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO TEXAS PORTFOLIO
--------------------------------------------------- -------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------------ YEAR ENDED ---------------------------------- 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) 0.54% 0.49% 0.48%+ 0.50%+ 0.32% 0.08% 0.00%+ 0.03%+
Net expenses
after
custodian fee
reduction 0.50% -- -- -- 0.27% -- -- --
Net investment
income 5.90% 6.02% 5.66%+ 5.71%+ 5.81% 6.20% 5.69%+ 5.82%+
PORTFOLIO
TURNOVER 30% 44% 21% 17% 39% 49% 27% 8%
NET ASSETS, end
of year
(000 omitted) $448,182 $502,250 $536,786 $497,001 $ 24,367 $ 28,227 $ 27,589 $ 16,029
</TABLE>
++The operating expenses of the Texas Portfolio may reflect a reduction of the
investment adviser fee and/or 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) 0.42% 0.35% 0.37%+ 0.42%+
Expenses after custodian fee reduction 0.37% -- -- --
Net investment income 5.71% 5.93% 5.32%+ 5.43%+
</TABLE>
+ Annualized.
* For the ten months ended July 31, 1994.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
(1) The expense ratios for the year ended July 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 July 31, 1995 have not been
adjusted to reflect this change.
See notes to financial statements
67
<PAGE> 68
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Arizona Municipals Portfolio (Arizona Portfolio), Colorado Municipals Portfolio
(Colorado Portfolio), Connecticut Municipals Portfolio (Connecticut Portfolio),
Michigan Municipals Portfolio (Michigan Portfolio), Minnesota Municipals
Portfolio (Minnesota Portfolio), New Jersey Municipals Portfolio (New Jersey
Portfolio), Pennsylvania Municipals Portfolio (Pennsylvania Portfolio) and Texas
Municipals Portfolio (Texas 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 of the Portfolios. The policies are in
conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts and options on
futures contracts listed on commodity exchanges are valued at closing settlement
prices. Over the counter options on financial futures contracts 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
contracts and may realize a loss.
F. 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 Portfolio records when-issued
securities on trade date and maintains security positions such that sufficient
liquid assets will be available to make payments for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are
marked-to-market daily and begin accruing interest on settlement date.
H. OTHER--Investment transactions are accounted for on a trade date basis.
I. EXPENSE REDUCTION--Investors Bank & Trust Company (IBT) serves as custodian
of the Portfolios. Prior to November 10, 1995, IBT was an affiliate of EVM.
Pursuant to the custodian agreements, IBT receives a fee reduced by credits
which are determined based on the average daily cash
68
<PAGE> 69
- --------------------------------------------------------------------------------
balances each Portfolio maintains with IBT. All significant credit balances used
to reduce each Portfolio's custodian fees are reported as a reduction of
expenses in the Statement of Operations.
J. 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.
(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 July 31, 1996, each Portfolio paid advisory fees as follows:
<TABLE>
<CAPTION>
AMOUNT EFFECTIVE RATE*
---------- ----------------
<S> <C> <C>
Arizona $ 574,999 0.41%
Colorado 130,068 0.28%
Connecticut 841,092 0.43%
Michigan 795,032 0.43%
Minnesota 295,178 0.36%
New Jersey 1,878,801 0.47%
Pennsylvania 2,262,320 0.47%
Texas 55,086 0.20%
</TABLE>
* Advisory fees as a percentage of average daily net assets.
To enhance the net income of the Colorado Portfolio and Texas Portfolio, BMR
made a reduction in its fee in the amount of $7,886 and $27,295, respectively.
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 July 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.
- --------------------------------------------------------------------------------
(3) INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities,
purchased option transactions and short-term obligations, for the year ended
July 31, 1996 were as follows:
<TABLE>
<CAPTION>
ARIZONA PORTFOLIO COLORADO PORTFOLIO CONNECTICUT PORTFOLIO MICHIGAN PORTFOLIO
------------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Purchases $24,965,770 $ 24,734,586 $ 45,400,072 $ 89,851,170
Sales 40,953,369 26,791,943 53,177,005 108,634,755
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA PORTFOLIO NEW JERSEY PORTFOLIO PENNSYLVANIA PORTFOLIO TEXAS PORTFOLIO
------------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Purchases $35,764,584 $155,358,451 $140,759,536 $10,330,871
Sales 44,316,406 181,497,593 194,013,159 13,335,858
</TABLE>
69
<PAGE> 70
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned by each Portfolio at July 31, 1996, as computed on a federal income tax
basis, are as follows:
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT MICHIGAN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Aggregate Cost $125,151,785 $ 42,777,307 $185,036,490 $166,177,298
------------ ------------ ------------ ------------
Gross unrealized appreciation $ 6,439,665 $ 1,927,576 $ 4,199,150 $ 7,532,072
Gross unrealized depreciation 946,912 289,810 2,150,027 1,488,042
------------ ------------ ------------ ------------
Net unrealized appreciation $ 5,492,753 $ 1,637,766 $ 2,049,123 $ 6,044,030
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA NEW JERSEY PENNSYLVANIA TEXAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Aggregate Cost $ 71,085,286 $365,003,591 $429,259,944 $ 24,136,847
------------ ------------ ------------ ------------
Gross unrealized appreciation $ 3,578,078 $ 18,724,771 $17,321,842 $ 900,832
Gross unrealized depreciation 219,699 922,059 2,372,904 254,739
------------ ------------ ------------ ------------
Net unrealized appreciation $ 3,358,379 $ 17,802,712 $14,948,938 $ 646,093
============== ============== =============== ==============
</TABLE>
- --------------------------------------------------------------------------------
(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 investment 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 funds and portfolios
at the end of each quarter. At July 31, 1996, the Arizona Portfolio, Michigan
Portfolio and Pennsylvania Portfolio had balances outstanding pursuant to this
line of credit of $496,000, $1,381,000 and $1,169,000 respectively. The
Portfolios did not have any significant borrowings or allocated fees during the
year ended July 31, 1996.
70
<PAGE> 71
- --------------------------------------------------------------------------------
(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 July 31, 1996, is
as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS NET UNREALIZED
PORTFOLIO EXPIRATION DATE CONTRACTS POSITION DEPRECIATION
- ------------- ------------------ ------------------------ -------- --------------
<S> <C> <C> <C> <C>
Arizona 9/96 180 U.S. Treasury Bonds Short $ (358,141)
Colorado 9/96 60 U.S. Treasury Bonds Short (46,110)
Connecticut 9/96 228 U.S. Treasury Bonds Short (107,865)
Michigan 9/96 240 U.S. Treasury Bonds Short (476,871)
Minnesota 9/96 105 U.S. Treasury Bonds Short (76,809)
New Jersey 9/96 365 U.S. Treasury Bonds Short (188,039)
Pennsylvania 9/96 610 U.S. Treasury Bonds Short (1,212,046)
Texas 9/96 46 U.S. Treasury Bonds Short (12,184)
</TABLE>
At July 31, 1996 the Portfolios had sufficient cash and/or securities to cover
margin requirements on open financial futures contracts.
71
<PAGE> 72
Independent Auditors' Report
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF:
ARIZONA MUNICIPALS PORTFOLIO
COLORADO MUNICIPALS PORTFOLIO
CONNECTICUT MUNICIPALS PORTFOLIO
MICHIGAN MUNICIPALS PORTFOLIO
MINNESOTA MUNICIPALS PORTFOLIO
NEW JERSEY MUNICIPALS PORTFOLIO
PENNSYLVANIA MUNICIPALS PORTFOLIO
TEXAS MUNICIPALS PORTFOLIO
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Arizona Municipals Portfolio, Colorado
Municipals Portfolio, Connecticut Municipals Portfolio, Michigan Municipals
Portfolio, Minnesota Municipals Portfolio, New Jersey Municipals Portfolio,
Pennsylvania Municipals Portfolio and Texas Municipals Portfolio as of July 31,
1996, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended July 31, 1996 and 1995
and supplementary data for the years ended July 31, 1996 and 1995, the ten
months ended July 31, 1994 and for the period from the start of business,
February 1, 1993 to September 30, 1993. These financial statements and
supplementary data are the responsibility of the 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 July 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 Arizona Municipals
Portfolio, Colorado Municipals Portfolio, Connecticut Municipals Portfolio,
Michigan Municipals Portfolio, Minnesota Municipals Portfolio, New Jersey
Municipals Portfolio, Pennsylvania Municipals Portfolio and Texas Municipals
Portfolio at July 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
AUGUST 23, 1996
72
<PAGE> 73
Investment Management
- --------------------------------------------------------------------------------
FUNDS OFFICERS INDEPENDENT TRUSTEES
THOMAS J. FETTER DONALD R. DWIGHT
President President, Dwight Partners, Inc.
Chairman, Newspaper 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 Management
THOMAS OTIS 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 President, Dwight Partners, Inc.
Chairman, Newspaper of New
England, Inc.
JAMES B. HAWKES
Vice President, Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
Investment Banking, Harvard
ROBERT B. MACINTOSH University Graduate School of
Vice President of Arizona, Business Administration
Colorado, Connecticut,
Michigan, Minnesota, NORTON H. REAMER
New Jersey, Pennsylvania President and Director,
and Texas Municipals United Asset Manangement
Portfolios and Corporation
Portfolio Manager of JOHN L. THORNDIKE
New Jersey Municipals Director, Fiduciary Company
Portfolio Incorporated
CYNTHIA J. CLEMSON JACK L. TREYNOR
Vice President and Investment Advisor and
Portfolio Manager of Consultant
Arizona Municipals
Portfolios
DAVID C. REILLY
Vice President and
Portfolio Manager of
Colorado and Minnesota
Municipals Portfolios
NICOLE ANDERES
Vice President and
Portfolio Manager of
Connecticut and Texas
Municipals Portfolios
TIMOTHY T. BROWSE
Vice President and
Portfolio Manager of
Michigan and Pennsylvania
Municipals Portfolio
JAMES L. O'CONNOR
Treasurer
THOMAS OTIS
Secretary
73
<PAGE> 74
- --------------------------------------------------------------------------------
FUNDS
INVESTMENT ADVISER OF STATE MUNICIPAL PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL STATE MUNICIPAL FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
74
<PAGE> 75
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 76
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
T-8CSRC-9/96
