Massachusetts Municipal Bond Portfolio
(A series of Eaton Vance Municipals Trust)
Annual Shareholder Report
September 30, 1996
[LOGO: HOUSE]
To Shareholders
Massachusetts Municipal Bond Portfolio (the "Fund") paid to its
shareholders monthly income dividends totalling $0.537 per share
during the fiscal year ended September 30, 1996.
Based on the most recent dividend paid and the Portfolio's net asset
value per share of $9.56 on September 30, 1996, the Fund's
annualized distribution rate was 5.60%. To equal that rate in a
taxable investment, a couple in the combined federal and state
43.68% tax bracket would have to earn 9.89%.
Following an upbeat year in 1995, the bond market encountered
difficulty in the first half of 1996. 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 could possibly be higher. By
mid-summer, employment data showed that job creation was exceeding
market estimates, and that the labor market was indeed tightening.
The fall brought news that job growth had cooled from the blistering
pace set early in the year, and that inflation was still not a
threat. However, the economic data still have failed to give a clear
indication of the economy's future direction. Accordingly, the
Federal Reserve effectively put its monetary policy on hold until
after the November elections.
An investment in municipal bonds continues to represent good value
for tax-conscious investors for several reasons. First, while
turning in somewhat faster growth than expected, the nation's
economy remains subdued. GDP grew at a revised 4.8% rate in the
second quarter - a relatively strong showing, but one not likely to
be sustained over the balance of the year. Recent indicators suggest
a possible slowdown in the second half of the year, and, more
importantly, 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 should retain their relative value.
Third, on the budget front, the deficit has been reduced
significantly. At present, the deficit as a percentage of GDP is the
smallest of all industrialized nations, alleviating near-term
borrowing needs.
Finally, and perhaps most important of all, the tax burden of our
citizens is still extraordinarily high. Municipal bonds remain one
of the better ways for most individuals to relieve that burden and
keep more of what they work so hard to earn.We believe that, despite
the occasional market fluctuations, a steadfast, long-term outlook
is the best way to reap the advantages of tax-free investing.
[PHOTO OF THOMAS J. FETTER OMITTED]
Sincerely,
/S/Thomas J. Fetter
Thomas J. Fetter
President
November 4, 1996
+ A portion of the Fund's income could be subject to federal
alternative minimum tax.
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.
Federal income tax information on distributions...
For Federal income tax purposes, 99.01% of the total dividends paid
by the Fund from net investment income during the fiscal year that
ended September 30, 1996, is designated as an exempt-interest
dividend. Tax legislation eliminated the exemption to market
discount rules applicable to tax-exempt obligations. As a result,
certain tax-exempt obligations acquired by the Portfolio subsequent
to April 30, 1993, at market discounts, may generate a small amount
of ordinary taxable income.
Included on the following page is a performance chart that compares
your Fund's total return with that of a broad-based securities
market index. The lines on the chart represent the total returns of
$10,000 hypothetical investments in 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 comprises
bonds principally from your individual state, the Index is composed
of bonds from all 50 states and many jurisdictions. The Index's
total return does not reflect any commissions or expenses that would
be incurred if an investor individually purchased or sold the
securities represented in the Index. It is not possible to invest
directly in the Lehman Brothers Municipal Bond Index.
Management Report
[GRAPHIC OF POWER LINES OMITTED]
Your investment at work
City of Boston, Massachusetts Harbor Electric Energy Company
The proceeds from these bonds were used to finance the cost of
acquiring, equipping, and installing electric distribution
facilities owned and operated by the Harbor Electric Energy Company,
a wholly owned subsidiary of Boston Edison Company.
Specifically, the new facilities consisted of buildings and
equipment that are part of the waste water treatment plant on Deer
Island in Boston Harbor. Included among the construction projects
was a 115-kilovolt submarine cable between Boston and Deer Island,
and a new permanent substation on Deer Island.
Portfolio Overview
[GRAPHIC OF MASSACHUSETTS OMITTED]
Based on market value as of September 30, 1996
Number of issues 96
Average quality A+
Investment grade 94.3%
Effective maturity (years) 11.00
Largest sectors:
Housing 14.3
Insured hospitals 12.9*
Hospitals 11.8
Water & sewer 9.1
Transportation 8.3
* Private insurance does not remove the market risks that are
associated with these investments.
The State of the State: Massachusetts
The Massachusetts economy has made a dramatic recovery from the
recession of 1990-1991, which was one of the most difficult in
recent memory. After three years of budget deficits, the election of
Governor William Weld in 1990 led to immediate changes on the
budgetary front. Since his election in 1990, the governor has
balanced the budget in every year of his administration. As a
result of its more conservative fiscal policies, the state's general
obligation debt has earned several rating increases since 1991.
Though the Massachusetts economic recovery was somewhat slow at
first, the business climate has shown great improvement in recent
years. Unemployment reached 4.0% in August of 1996, its lowest level
since June of 1989, and job growth has been increasing at a 1.4% annual
rate, with 114,800 new jobs added in the past two years. The
technology and defense-related sectors, which experienced
significant job losses, are beginning to turn around.
The state government has become much friendlier towards the business
community through tax cuts, regulatory reform, investing in
infrastructure, and programs to help small businesses.
[GRAPHIC WORM CHART OMITTED:Comparison of Change in Value of a $10,000
Investment in Eaton Vance Massachusetts Municipal Bond Portfolio and the
Lehman Brothers Municipal bond Index From June 30, 1993, through September 30,
1996]
Lehman Brothers Municipal Bond Index $11,891
Eaton Vance Massachusetts Municipal Bond Portfolio $11,435
Average 1 Life of
Annual Year Fund*
Returns 6.3% 4.4%
Massachusetts Municipal Bond Portfolio vs.
Lehman Brothers 7-Year Municipal Bond Index
Date Fund Index
----------- ----------- -----------
6/30/93 $10,000 $10,000
7/31/93 $9,930 $10,013
8/31/93 $10,215 $10,221
9/30/93 $10,332 $10,338
10/31/93 $10,338 $10,358
11/30/93 $10,234 $10,266
12/31/93 $10,455 $10,483
1/31/94 $10,567 $10,603
2/28/94 $10,314 $10,328
3/31/94 $9,799 $9,908
4/30/94 $9,785 $9,992
5/31/94 $9,876 $10,078
6/30/94 $9,786 $10,020
7/31/94 $9,975 $10,200
8/31/94 $10,021 $10,236
9/30/94 $9,837 $10,086
10/31/94 $9,588 $9,907
11/30/94 $9,301 $9,727
12/31/94 $9,587 $9,941
1/31/95 $9,955 $10,226
2/28/95 $10,276 $10,523
3/31/95 $10,377 $10,644
4/30/95 $10,376 $10,656
5/31/95 $10,655 $10,996
6/30/95 $10,473 $10,900
7/31/95 $10,536 $11,003
8/31/95 $10,675 $11,143
9/30/95 $10,759 $11,214
10/31/95 $10,958 $11,377
11/30/95 $11,179 $11,566
12/31/95 $11,344 $11,677
1/31/96 $11,373 $11,765
2/28/96 $11,252 $11,685
3/31/96 $11,093 $11,536
4/30/96 $11,076 $11,503
5/31/96 $11,092 $11,499
6/30/96 $11,208 $11,624
7/31/96 $11,290 $11,729
8/31/96 $11,284 $11,727
9/30/96 $11,435 $11,891
Footnote reads:
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: Tower Data Systms, Bethesda, MD. *Investment operations
commenced 6/17/93. +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:
[PHOTO OF ROBERT B. MACINTOSH OMITTED]
"This Fund owns quite a few well-known names such as the
Massachusetts Turnpike Authority, the Massachusetts Water Resources
Authority, and some wholesale electric bonds. These credits may face
difficulties in the long term, given the pressures from increasing
debt levels and deregulation, but I feel comfortable holding onto
them for the time being.
"The hospital sector has also faced difficulties due to downsizing
and cost cutting. I am pleased, however, with the Fund's current
hospital holdings, such as Beth Israel Hospital and Daughters of
Charity. I am making minor adjustments to the Portfolio as I see
fit, but no major change in strategy is necessary."
- - Robert B. MacIntosh
Massachusetts Municipal Bond Portfolio
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
September 30, 1996
<S> <C> <C>
Assets:
Investment in Massachusetts Municipals Portfolio, at value
(identified cost, $6,798,559) (Note 1A) $ 6,943,704
Receivable from the Administrator (Note 4) 13,670
Deferred organization expenses (Note 1D) 981
-------------
Total assets $ 6,958,355
-------------
Liabilities:
Dividends payable $ 14,852
Payable to affiliate --
Trustees' fees (Note 4) 42
Accrued expenses 3,237
-------------
Total liabilities 18,131
-------------
Net Assets for 725,733 shares of beneficial interest outstanding $ 6,940,224
=============
Sources of Net Assets:
Paid-in capital $ 7,655,850
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (853,224)
Accumulated distributions in excess of net investment income (7,547)
Unrealized appreciation from Portfolio
(computed on the basis of identified cost) 145,145
-------------
Total $ 6,940,224
=============
Net Asset Value, Offering Price and Redemption Price Per Share
($6,940,224 (divided by) 725,733 shares of
beneficial interest outstanding) $ 9.56
======
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended September 30, 1996
<S> <C> <C>
Investment Income (Note 1B):
Investment income allocated from Portfolio $ 439,739
Expenses allocated from Portfolio (37,335)
-------------
Net investment income from Portfolio $ 402,404
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 162
Legal and accounting services 6,602
Printing and postage 6,153
Transfer and dividend disbursing agent fees 4,303
Amortization of organization expenses (Note 1D) 3,889
Custodian fee (Note 1G) 3,000
Registration costs 2,100
Miscellaneous 2,169
-------------
Total expenses $ 28,378
Deduct allocation of expenses to the Administator (Note 4) 13,670
-------------
Net expenses 14,708
-------------
Net investment income $ 387,696
-------------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) from Portfolio --
Investment transactions (identified cost basis) $ 40,451
Financial futures contracts (8,215)
-------------
Net realized gain $ 32,236
Change in unrealized appreciation 28,150
-------------
Net realized and unrealized gain $ 60,386
-------------
Net increase in net assets from operations $ 448,082
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION.
Statements of Changes in Net Assets
For the Year Ended September 30,
----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 387,696 $ 430,380
Net realized gain (loss) 32,236 (582,635)
Change in unrealized appreciation 28,150 717,570
------------ ------------
Net increase in net assets from operations $ 448,082 $ 565,315
------------ ------------
Distributions to shareholders (Note 2) --
From net investment income $ (387,696) $ (429,708)
In excess of net investment income (506) --
------------ ------------
Total distributions to shareholders $ (388,202) $ (429,708)
------------ ------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $ 629,549 $ 1,433,581
Net asset value of shares issued to shareholders in payment
of distributions declared 101,348 96,976
Cost of shares redeemed (1,036,510) (3,818,659)
------------ ------------
Decrease in net assets from Fund share transactions $ (305,613) $ (2,288,102)
------------ ------------
Net decrease in net assets $ (245,733) $ (2,152,495)
Net Assets:
At beginning of year 7,185,957 9,338,452
------------ ------------
At end of year $ 6,940,224 $ 7,185,957
============ ============
Accumulated distributions in excess of net
investment income included in net assets at end of year $ (7,547) $ (7,644)
============ ============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended September 30,
-----------------------------------------------------------
1996 1995 1994 1993**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.510 $ 9.220 $10.260 $10.000
------- ------- ------- -------
Income (loss) from operations:
Net investment income $ 0.534 $ 0.546 $ 0.548 $ 0.141
Net realized and unrealized gain (loss) 0.051 0.290 (1.026) 0.284
------- ------- ------- -------
Total income (loss) from operations $ 0.585 $ 0.836 $(0.478) $ 0.425
------- ------- ------- -------
Less distributions:
From net investment income $(0.534) $(0.546) $(0.548) $(0.141)
In excess of net investment income (0.001) -- (0.004) (0.024)
In excess of net realized gain -- -- (0.010) --
------- ------- ------- -------
Total distributions $(0.535) $(0.546) $(0.562) $(0.165)
------- ------- ------- -------
Net asset value, end of year $ 9.560 $ 9.510 $ 9.220 $10.260
======= ======= ======= =======
Total Return (2) 6.28% 9.37% (4.79%) 4.04%
Ratios/Supplemental Data*:
Net assets, end of year (000 omitted) $ 6,940 $ 7,186 $ 9,338 $ 5,063
Ratio of net expenses to average
net assets (1)(3) 0.76% 0.63% 0.60% 1.21%+
Ratio of net expenses to average net assets
after custodian fee reduction (1) 0.75% 0.60% -- --
Ratio of net investment income to average
daily net assets 5.56% 5.93% 5.65% 4.80%+
* For the years ended September 30, 1996, 1995 and 1994, the operating expenses of the Fund reflect a reduction of
expenses by the Administrator. Had such action not been taken, net investment income per share and the ratios would
have been as follows:
Net investment income per share: $ 0.516 $ 0.523 $ 0.498
======= ======= =======
Ratios (As a percentage of average daily net assets):
Expenses (1)(3) 0.95% 0.88% 1.12%
Expenses after custodian fee reduction (1) 0.94% 0.85% --
Net investment income 5.37% 5.68% 5.13%
+ Annualized.
** For the period from the start of business, June 17, 1993, to September 30, 1993.
(1) Includes the Fund's share of Massachusetts Municipals Portfolio's allocated expenses.
(2) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset
value on the last day of each period reported. Dividends and distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is computed on a non-annualized basis.
(3) The expense ratios for the years ended September 30, 1996 and 1995 have been adjusted to reflect a change in
reporting requirements. The reporting guidelines require the Fund to increase its expense ratio by the effect of
any expense offset arrangements with its service providers. The expense ratios for each of the periods ended on or
before September 30, 1994 have not been adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Massachusetts Municipal Bond Portfolio (the Fund) is a non-
diversified series of Eaton Vance Municipals Trust (the Trust). The
Trust is an entity of the type commonly known as a Massachusetts
business trust and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The
Fund invests all of its investable assets in interests in
Massachusetts Municipals Portfolio (the Portfolio), a New York
Trust, having the same investment objective as the Fund. The value
of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (2.5% at
September 30, 1996). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the Portfolio of investments,
are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The following is a
summary of significant accounting policies consistently followed by
the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting
principles.
A. Investment Valuations - Valuation of securities by the Portfolio
is discussed in Note 1A of the Portfolio Notes to Financial
Statements, which are included elsewhere in this report.
B. Income - The Fund's net investment income consists of the Fund's
pro rata share of the net investment income of the Portfolio, less
all actual and accrued expenses of the Fund determined in accordance
with generally accepted accounting principles.
C. Federal Taxes - The Fund's policy is to comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute to shareholders each year all
of its taxable and tax-exempt income, including any net realized
gain. Accordingly, no provision for Federal income or excise tax is
necessary. At September 30, 1996, the Fund for Federal income tax
purposes had a capital loss carryover of $791,555 which will reduce
taxable income arising from future net realized gains, if any, to
the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for
Federal income or excise tax. Such capital loss carryover will
expire on September 30, 2004, ($494,027) and September 30, 2003,
($297,528). Dividends paid by the Fund from net interest on tax-
exempt municipal bonds allocated from the Portfolio are not
includable by shareholders as gross income for Federal income tax
purposes because the Fund and Portfolio intend to meet certain
requirements of the Internal Revenue Code applicable to regulated
investment companies which will enable the Fund to pay exempt-
interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986 may be considered
a tax preference item to shareholders.
D. Deferred Organization Expenses - Costs incurred by the Fund in
connection with its organization, including registration costs, are
being amortized on the straight-line basis over five years.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
F. Other - Investment transactions are accounted for on a trade date
basis.
G. Expense Reduction - Investors Bank & Trust Company (IBT) serves
as custodian to the Fund and the Portfolio. Prior to November 10,
1995, IBT was an affiliate of EVM. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which
are determined based on the average cash balances the Fund or the
Portfolio maintains with IBT. All significant credit balances used
to reduce the Fund's custodian fees are reported as a reduction of
expenses on the statement of operations.
(2) Distributions to Shareholders
The net income of the Fund is determined daily and substantially all
of the net income so determined is declared as a dividend to
shareholders of record at the time of declaration. Distributions are
paid monthly. Distributions of allocated realized capital gains, if
any, are made at least annually. Shareholders may reinvest capital
gain distributions in additional shares of 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 Fund distinguishes between distributions on a tax basis and a
financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as a return of
capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which
result in temporary over distributions for financial statement
purposes are classified as distributions in excess of net investment
income or accumulated net realized gains. Permanent differences
between book and tax accounting relating to distributions are
reclassified to paid-in capital. The tax treatment of distributions
for the calendar year will be reported to shareholders prior to
February 1, 1997 and will be based on tax accounting methods which
may differ from amounts determined for financial statement purposes.
(3) Shares of Beneficial Interest
<TABLE>
<CAPTION>
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value). Transactions in Fund shares were as follows:
Year Ended September 30,
-----------------------------------------------------
1996 1995
------------------- -------------------
<S> <C> <C>
Sales 65,889 158,095
Issued to shareholders electing to receive
payments of distributions in Fund shares 10,560 10,463
Redemptions (106,480) (425,246)
------- -------
Net decrease (30,031) (256,688)
======= =======
</TABLE>
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the Administrator of the
Fund, but receives no compensation. The Portfolio has engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render
investment advisory services. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. To
enhance the net income of the Fund for the year ended September 30,
1996, $13,670 of expenses related to the operation of the Fund were
allocated to EVM. Except as to Trustees of the Fund and the
Portfolio, who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the
Fund out of the investment adviser fee earned by BMR.
Certain of the officers and Trustees of the Fund and Portfolio are
officers and directors/trustees of the above organizations.
(5) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio
for the year ended September 30, 1996, aggregated $647,809 and
$1,347,153, respectively.
Independent Auditor's Report
To the Trustees and Shareholders of
Eaton Vance Municipals Trust:
We have audited the accompanying statement of assets and liabilities
of Massachusetts Municipal Bond Portfolio (one of the series
constituting Eaton Vance Municipals Trust) as of September 30, 1996,
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period ended September 30, 1996 and the financial highlights for
each of the three years in the period ended September 30, 1996 and
for the period from the start of business, June 17, 1993, to
September 30, 1993. 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 audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Massachusetts Municipal Bond Portfolio series of Eaton Vance
Municipals Trust at September 30, 1996, the results of its
operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 1, 1996
Massachusetts Municipals Portfolio
Portfolio of Investments - September 30, 1996
<TABLE>
<CAPTION>
Tax-Exempt Investments - 100%
Ratings (Unaudited) Principal
- -------------------
Amount
Standard (000
Moody's & Poor's Omitted) Security Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 3.6%
Aa1 AA+ $ 1,625 Massachusetts Health and
Educational Facilities
Authority, HEFA, Amherst
College, 6.80%, 11/1/21 $ 1,757,096
A1 A+ 250 Massachusetts HEFA,
Tufts University,
7.75%, 8/1/13 269,148
NR BBB- 3,690 Massachusetts HEFA,
Merrimack College,
7.125%, 7/1/12 3,808,656
Aa1 AA 1,000 Massachusetts HEFA,
Williams College,
5.75%, 7/1/19 1,010,110
Aa1 AA+ 1,000 Massachusetts HEFA,
Wellesley College,
5.375%, 7/1/19 953,870
A1 NR 2,000 New England Educational
Loan Marketing
Corporation, (AMT), 6.90%,
11/1/09 2,137,020
------------
$ 9,935,900
------------
Escrowed -- 1.4%
NR AAA $10,000 Massachusetts General
Obligation Federal Assisted
Housing, Section 8,
0%, 2/1/23 $ 1,786,500
Baa1 AAA 1,900 Puerto Rico Aqueduct
and Sewer Authority,
Prerefunded to 7/1/98,
7.00%, 7/1/19 2,030,416
------------
$ 3,816,916
------------
General Obligations -- 6.4%
Baa1 NR $ 1,000 City of Lowell,
6.375%, 8/15/01 $ 1,060,880
A1 A+ 3,400 Commonwealth of
Massachusetts, 5.00%,
1/1/12 3,152,854
A1 A+ 4,265 Massachusetts Bay
Transportation Authority
(MBTA), 5.50%, 3/1/21 4,045,523
A1 A+ 1,000 MBTA, 5.90%, 3/1/12 1,020,180
NR BBB 2,145 Government of Guam,
5.40%, 11/15/18 1,944,550
A NR 3,375 Town of Nantucket,
6.80%, 12/1/11 3,693,870
Baa1 A 100 Puerto Rico Public
Buildings Authority,
5.50%, 7/1/21 94,570
A1 A+ 250 University of Massachusetts
Building Authority,
7.20%, 5/1/04 282,750
NR NR 2,350 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 2,500,635
------------
$ 17,795,812
------------
Health Care -- 1.3%
NR AA $ 1,485 Massachusetts HEFA,
(FHA), Deutsches Altenheim,
7.70%, 11/1/31 $ 1,592,217
NR AAA 2,100 Massachusetts Industrial
Finance Agency, IFA,
Heights Crossing, (AMT),
6.15%, 2/1/35 2,101,470
------------
$ 3,693,687
------------
Hospitals -- 11.8%
A A $ 3,000 Massachusetts HEFA,
Charlton Memorial Hospital,
7.25%, 7/1/13 $ 3,187,530
A1 A+ 530 Massachusetts HEFA,
Spaulding Rehabilitation
Hospital, 7.625%, 7/1/21 560,157
Baa1 BBB+ 2,000 Massachusetts HEFA,
New England Baptist Hospital,
7.35%, 7/1/17 2,118,720
Aa NR 3,100 Massachusetts HEFA,
Daughters of Charity Health
System, 6.10%, 7/1/14 3,161,194
Baa BBB 5,025 Massachusetts HEFA,
Sisters of Providence Health
System, 6.50%, 11/15/08 5,030,779
Baa BBB 2,085 Massachusetts HEFA,
Sisters of Providence Health
System, 6.625%, 11/15/22 2,070,697
NR A- 1,020 Massachusetts HEFA,
Jordan Hospital,
6.875%, 10/1/15 1,059,627
NR A- 2,870 Massachusetts HEFA,
Jordan Hospital,
6.875%, 10/1/22 2,981,500
Baa BB 5,500 Massachusetts HEFA,
Milford-Whitinsville Hospital,
7.75%, 7/15/17 5,730,010
NR BBB- 2,600 Massachusetts HEFA,
North Adams Hospital,
6.625%, 7/1/18 2,557,022
NR NR 9,000 Massachusetts IFA,
Biomedical Research
Corporation, 0%, 8/1/09 4,051,349
------------
$ 32,508,585
------------
Housing -- 14.3%
NR AAA $ 2,750 Framingham Housing
Authority, (GNMA),
6.65%, 2/20/32 $ 2,802,800
A1 A+ 5,855 Massachusetts Housing
Finance Agency, HFA,
6.375%, 4/1/21 5,894,931
Aa A+ 400 Massachusetts HFA,
7.35%, 12/1/16 422,956
Aaa AAA 2,750 Massachusetts HFA,
(FNMA), 6.90%, 11/15/21 2,918,245
Aaa AAA 1,000 Massachusetts HFA, (FNMA),
6.875%, 11/15/11 1,073,290
Aa A+ 2,795 Massachusetts HFA, (AMT),
7.125%, 6/1/25 2,924,464
Aa A+ 1,500 Massachusetts HFA, (AMT),
8.10%, 12/1/21 1,588,230
Aa A+ 2,195 Massachusetts HFA, (AMT),
8.10%, 6/1/20 2,305,276
Aa A+ 7,250 Massachusetts HFA, (AMT),
6.60%, 12/1/26 7,437,919
Aa A+ 6,400 Massachusetts HFA, (AMT),
6.60%, 12/1/26 6,565,888
Aa A+ 5,500 Massachusetts HFA, (AMT),
6.60%, 12/1/24 5,647,565
------------
$ 39,581,564
------------
Industrial Development/
Pollution Control -- 4.2%
NR NR $ 2,075 Massachusetts IFA,
Hingham Water Company,
(AMT), 6.60%, 12/1/15 $ 2,124,115
NR NR 3,000 Massachusetts IFA,
Hingham Water Company,
(AMT), 6.90%, 12/1/29 3,081,840
A1 AA- 1,550 Puerto Rico Industrial,
Medical and Environmental
Pollution Control Authority,
The Upjohn Company,
7.50%, 12/1/23 1,688,524
Baa3 BB+ 1,000 Puerto Rico Port Authority,
American Airlines, (AMT),
6.30%, 6/1/23 1,012,520
Baa3 BB+ 3,750 Puerto Rico Port Authority,
American Airlines, (AMT),
6.25%, 6/1/26 3,792,938
------------
$ 11,699,937
------------
Insured Education -- 4.0%
Aaa AAA $ 315 Massachusetts Educational
Finance Authority, (MBIA),
(AMT), 7.25%, 1/1/09 $ 332,360
Aaa AAA 2,000 Massachusetts Educational
Finance Authority, (AMBAC),
(AMT), 7.375%, 1/1/12 2,121,840
Aaa AAA 250 Massachusetts HEFA,
Northeastern University,
(AMBAC), 7.50%, 10/1/08 268,828
Aaa AAA 400 Massachusetts HEFA,
Boston University "RIBS",
(MBIA), Variable, 10/1/31 (1) 452,008
Aaa AAA 3,000 Massachusetts HEFA,
Tufts University, (FGIC),
5.95%, 8/15/18 3,035,400
NR AAA 5,170 Massachusetts HEFA,
Wentworth Insitiute,
(CLEE), 5.50%, 10/1/23 4,806,963
------------
$ 11,017,399
------------
Insured General Obligations -- 1.2%
Aaa AAA $ 1,795 City of Boston, (FSA),
4.875%, 9/1/09 $ 1,689,005
Aaa AAA 1,000 Commonwealth of
Puerto Rico "RIBS",
(AMBAC), Variable,
7/1/15 (1) 1,016,500
Aaa AAA 600 Town of Tyngsborough,
(AMBAC), 6.90%, 5/15/08 672,702
------------
$ 3,378,207
------------
Insured Hospitals -- 12.9%
Aaa AAA $ 750 Massachusetts HEFA,
Addison Gilbert Hospital,
(MBIA), 5.75%, 7/1/23 $ 730,943
Aaa AAA 300 Massachusetts HEFA,
Berkshire Health Systems,
(MBIA), 7.60%, 10/1/14 325,143
Aaa AAA 3,750 Massachusetts HEFA,
Beth Israel Hospital,
(AMBAC), Variable,
7/1/25 (1) 3,788,438
Aaa AAA 1,500 Massachusetts HEFA,
Capital Assist Program,
(MBIA), 7.20%, 7/1/09 1,623,780
Aaa AAA 2,050 Massachusetts HEFA,
Fallon Healthcare System,
(FSA), 6.75%, 6/1/20 (2) 2,259,654
Aaa AAA 2,500 Massachusetts HEFA,
Fallon Healthcare System
(FSA), 6.875%, 6/1/11 2,784,225
Aaa AAA 2,040 Massachusetts HEFA,
Beverly Hospital, (MBIA),
7.30%, 7/1/13 2,208,565
Aaa AAA 500 Massachusetts HEFA,
Baystate Medical Center,
(FGIC), 5.00%, 7/1/20 448,730
Aaa AAA 3,000 Massachusetts HEFA,
The Medical Center of
Central Massachusetts,
(AMBAC), "CARS", Variable,
6/23/22 (1) 3,363,270
Aaa AAA 2,000 Massachusetts HEFA,
St. Elizabeth Hospital Issue,
"LEVRRS", (FSA),
Variable, 8/15/21 (1) 2,274,120
Aaa AAA 2,600 Massachusetts HEFA,
Saint Luke's Hospital,
"Yield Curve Notes",
(MBIA), Variable, 8/15/13 (1) 2,542,150
Aaa AAA 2,600 Massachusetts HEFA,
Saint Luke's Hospital,
"Yield Curve Notes",
(MBIA), Variable,
8/15/23 (1) 2,560,194
Aaa AAA 1,200 Massachusetts HEFA,
University Hospital,
(MBIA), 7.25%, 7/1/19 1,314,864
Aaa AAA 2,430 Massachusetts HEFA,
Lahey Clinic, (MBIA),
5.375%, 7/1/23 2,259,171
Aaa AAA 1,000 Massachusetts HEFA,
New England Medical Center,
(FGIC), 6.50%, 7/1/12 1,051,970
NR AAA 2,625 Massachusetts HEFA,
Winchester Hospital, (CLEE),
5.75%, 7/1/14 2,570,453
NR AAA 3,650 Massachusetts HEFA,
Winchester Hospital, (CLEE),
5.75%, 7/1/24 3,507,978
------------
$ 35,613,648
------------
Insured Housing -- 2.5%
Aaa AAA $ 2,500 Massachusetts HFA,
(AMT), (AMBAC),
6.40%, 12/1/15 $ 2,526,325
Aaa AAA 2,000 Massachusetts HFA,
(AMBAC), 6.45%, 1/1/36 2,063,880
Aaa AAA 2,225 Massachusetts HFA,
(AMT), (MBIA),
6.375%, 12/1/19 2,238,773
------------
$ 6,828,978
------------
Insured Transportation -- 2.3%
Aaa AAA $ 5,860 Massachusetts Port
Authority, (AMT), (FGIC),
7.50%, 7/1/20 $ 6,396,659
------------
Insured Utility -- 2.0%
Aaa AAA $ 5,610 Massachusetts Municipal
Wholesale Electric Company,
(MBIA), 6.00%, 7/1/18 $ 5,655,385
------------
Lease/Certificate of
Participation -- 3.5%
NR A- $ 7,800 Plymouth County,
Massachusetts Correctional
Facility Project,
7.00%, 4/1/22 $ 8,549,346
NR BBB 1,200 Puerto Rico Industrial,
Tourist, Educational, Medical
and Environmental Control
Authority, Guaynabo Lease,
5.625%, 7/1/22 1,095,912
------------
$ 9,645,258
------------
Nursing Homes -- 2.2%
NR NR $ 2,400 Massachusetts HEFA,
Fairview Care Facilities,
10.25%, 1/1/21 $ 2,717,400
NR NR 3,225 Massachusetts IFA,
Age Institute of Massachusetts,
8.05%, 11/1/25 3,234,740
------------
$ 5,952,140
------------
Solid Waste -- 0.5%
NR NR $ 1,245 City of Pittsfield,
Vicon Recovery Associates
Project, 7.95%, 11/1/04 $ 1,295,236
------------
Special Tax Revenue -- 2.8%
A1 AA $ 3,000 Commonwealth of
Massachusetts,
6.00%, 6/1/13 $ 3,047,070
A1 AA- 4,560 Commonwealth of
Massachusetts,
5.80%, 6/1/14 4,579,654
------------
$ 7,626,724
------------
Transportation -- 8.3%
NR BBB $ 5,950 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 6,058,409
Aa AA- 9,800 Massachusetts Port
Authority, 6.00%, 7/1/23 9,938,572
A1 A+ 7,750 Massachusetts Turnpike
Authority, 5.00%, 1/1/20 6,837,438
------------
$ 22,834,419
------------
Utilities -- 5.7%
NR BBB $ 2,765 Guam Power Authority,
5.25%, 10/1/23 $ 2,413,043
Baa BBB+ 3,500 Massachusetts Municipal
Wholesale Electric Company,
6.75%, 7/1/11 3,682,385
Baa BBB+ 9,060 Massachusetts Municipal
Wholesale Electric Company,
6.625%, 7/1/18 9,577,779
Baa1 BBB+ 150 Puerto Rico Electric Power
Authority, 5.50%, 7/1/20 142,739
------------
$ 15,815,946
------------
Water and Sewer -- 9.1%
Baa1 BBB $12,185 City of Boston Massachusetts
Harbor Electric Energy
Company Project, (AMT),
7.375%, 5/15/15 $ 13,112,888
A A 1,500 MWRA, 5.25%, 3/1/13 1,423,980
A A 5,175 MWRA, 5.00%, 3/1/22 4,609,010
A A 4,165 MWRA, 5.25%, 12/1/15 3,957,162
NR NR 2,000 Virgin Islands Water and
Power Authority,
7.60%, 1/1/12 2,150,401
------------
$ 25,253,441
------------
Total Tax-Exempt
Investments (identified
cost $259,784,548) $276,345,841
============
(1) Security has been issued as an inverse floater bond.
(2) Security has been segregated to cover margin requirements on open financial futures
contracts.
AMT -- Interest earned from these securities may be considered a tax preference item for
purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Massachusetts
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic developments, at
September 30, 1996, 22.6% of the securities in the portfolio of investments are backed by
bond insurance of various financial institutions and financial guaranty assurance
agencies. The aggergate percentage insured by financial institution ranged from 0.6% to
8.1% of total investments.
See notes to financial statements
</TABLE>
Massachusetts Municipals Portfolio
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
September 30, 1996
<S> <C> <C>
Assets:
Total investments, at value (identified cost,
$259,784,548) (Note 1A) $ 276,345,841
Cash 337
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 78,469
Interest receivable 5,203,030
Deferred organization expenses (Note 1D) 7,209
-------------
Total assets $ 281,634,886
-------------
Liabilities:
Demand note payable (Note 5) $ 484,000
Payable to affiliate--
Trustees' fees (Note 2) 3,712
Accrued expenses 17,938
-------------
Total liabilities 505,650
-------------
Net Assets applicable to investors' interest in Portfolio $ 281,129,236
=============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 264,876,671
Unrealized appreciation of investments and financial
futures contracts (computed on the basis of identified cost) 16,252,565
-------------
Total $ 281,129,236
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended September 30, 1996
<S> <C> <C>
Investment Income:
Interest income (Note 1B) $ 18,541,089
Expenses --
Investment adviser fee (Note 2) $ 1,343,099
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 15,864
Custodian fee (Note 1J) 136,510
Legal and accounting services 35,453
Amortization of organization expenses (Note 1D) 5,223
Miscellaneous 67,101
-------------
Total expenses $ 1,603,250
Deduct reduction of custodian fee (Note 1J) 28,177
-------------
Net expenses 1,575,073
-------------
Net investment income $ 16,966,016
-------------
Realized and Unrealized Gain (Loss):
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,401,693
Financial futures contracts (305,415)
-------------
Net realized gain $ 3,096,278
Change in unrealized appreciation (depreciation) --
Investments $ (962,702)
Financial futures contracts (204,628)
-------------
Net unrealized depreciation (1,167,330)
-------------
Net realized and unrealized gain $ 1,928,948
-------------
Net increase in net assets from operations $ 18,894,964
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended September 30,
----------------------------------------------
1996 1995
-------------------- --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 16,966,016 $ 17,915,854
Net realized gain (loss) 3,096,278 (15,667,434)
Change in unrealized appreciation (depreciation) (1,167,330) 23,987,414
------------ ------------
Net increase in net assets from operations $ 18,894,964 $ 26,235,834
------------ ------------
Capital transactions --
Contributions $ 16,336,133 $ 27,917,577
Withdrawals (56,272,108) (60,522,944)
------------ ------------
Decrease in net assets resulting from
capital transactions $(39,935,975) $(32,605,367)
------------ ------------
Total decrease in net assets $(21,041,011) $ (6,369,533)
Net Assets:
At beginning of year 302,170,247 308,539,780
------------ ------------
At end of year $281,129,236 $302,170,247
============ ============
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
For the Year Ended September 30,
--------------------------------------------------------------
1996 1995 1994 1993*
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Net expenses (1) 0.55% 0.56% 0.51% 0.49%+
Net expenses, after custodian fee reduction 0.54% 0.53% -- --
Net investment income 5.77% 6.00% 5.74% 5.72%+
Net assets, end of year (000 omitted) $281,129 $302,170 $308,540 $290,613
Portfolio Turnover 51% 87% 53% 38%
+ Annualized.
* For the period from the start of business, February 1, 1993 to September 30, 1993.
(1) The expense ratios for the years ended September 30, 1996 and 1995 have been adjusted to reflect a change in
reporting requirements. The new reporting guidelines require the Portfolio to increase its expense ratio by the
effect of any expense offset arrangements with its service providers. The expense ratios for each of the
periods ended on or before September 30, 1994 have not been adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
Massachusetts Municipals Portfolio ("the Portfolio"), is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company which was organized as a trust
under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue interests in the
Portfolio. The following is a summary of the significant accounting
policies consistently followed by the Portfolio in the preparation
of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Investment Valuations - Municipal bonds are normally valued on
the basis of valuations furnished by a pricing service. Taxable
obligations, if any, for which price quotations are readily
available are normally valued at the mean between the latest bid and
asked prices. Futures contracts and options on futures contracts
listed on commodity exchanges are valued at closing settlement
prices. Options on futures contracts which are traded over the
counter are 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 market value using methods determined in good faith by or at
the direction of the Trustees.
B. Income - Interest income is determined on the basis of interest
accrued, adjusted for amortization of premium or discount when
required for Federal income tax purposes.
C. Income Taxes - The Portfolio is treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for
Federal or state taxes on any taxable income of the Portfolio
because each investor in the Portfolio is individually responsible
for the payment of any taxes on its share of such income. Since some
of the Portfolios' investors are regulated investment companies that
invest all or substantially all of their assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income
and diversification requirements (under the Internal Revenue Code),
in order for its investors to satisfy them. The Portfolio will
allocate, at least annually among its investors, each investor's
distributive share of the Portfolios' net taxable (if any) and tax-
exempt investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. Interest income
received by the Portfolio on investments in municipal bonds which is
excludable from gross income under the Internal Revenue Code, will
retain its status as income exempt from Federal income tax when
allocated to the Portfolio's investors. The portion of such
interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item for
investors.
D. Deferred Organization Expenses - Costs incurred by the Portfolio
in connection with its organization are being amortized on the
straight-line basis over five years.
E. Financial Futures Contracts - Upon the entering of a financial
futures contract, the Portfolio is required to deposit ("initial
margin") either in cash or securities an amount equal to a certain
percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio
("margin maintenance") each day, dependent on the daily fluctuations
in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed
only to hedge against anticipated future changes in interest rates.
Should interest rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts
and may realize a loss.
F. Options on Financial Futures Contracts - Upon the purchase of a
put option on a financial futures contract by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the
Portfolio will realize a loss in the amount of the cost of the
option. When the Portfolio enters into a closing sales transaction,
it 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 the Portfolio exercises a put option,
settlement is made in cash. The risk associated with purchasing
options is limited to the premium originally made.
G. When-issued and Delayed Delivery Transactions - The Portfolio may
engage in when-issued and 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 earning interest on settlement date.
H. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
I. Other - Investment transactions are accounted for on a trade date
basis.
J. Expense Reduction - Investors Bank & Trust Company (IBT) serves
as custodian of the Portfolio. Prior to November 10, 1995, IBT was
an affiliate of EVM. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the
average daily cash balances the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian
fees are reported as a reduction of expenses on the Statement of
Operations.
(2) Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and
Research (BMR), a wholly-owned subsidiary of Eaton Vance Management
(EVM), as compensation for management and investment advisory
services rendered to the Portfolio. The fee is based upon a
percentage of average daily net assets plus a percentage of gross
income (i.e., income other than gains from the sale of securities).
For the year ended September 30, 1996, the fee was equivalent to
0.46%, of the Portfolio's average net assets for such period and
amounted to $1,343,099. Except as to Trustees of the Portfolio who
are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Portfolio
out of such investment adviser fee.
Trustees of the Portfolio that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a portion of
their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the year ended September 30, 1996,
no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers
or directors/trustees of the above organizations.
(3) Investments
For the year ended September 30, 1996, purchases and sales of
investments, other than U.S. Government securities, purchased option
transactions, and short-term obligations, aggregated $147,661,742
and $169,737,556, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned by the Portfolio at September 30, 1996, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $259,803,177
============
Gross unrealized appreciation $ 16,636,591
Gross unrealized depreciation 93,927
------------
Net unrealized appreciation $ 16,542,664
============
(5) Line of Credit
The Portfolio participates with other portfolios and funds managed
by BMR and EVM in a $120 million unsecured line of credit agreement
with a bank. The line of credit consists of a $20 million committed
facility and a $100 million discretionary facility. The Portfolio
may temporarily borrow up to 5% of its total assets to satisfy
redemption requests or settle securities transactions. Interest is
charged to each portfolio or fund based on its borrowings at an
amount above either the bank's adjusted certificate of deposit rate,
a variable adjusted certificate of deposit rate, or a Federal funds
effective rate. In addition, a fee computed at an annual rate of 1/4
of 1% on the $20 million committed facility and on the daily unused
portion of the $100 million discretionary facility is allocated
among the participating portfolios and funds at the end of each
quarter. The Portfolio did not have any significant borrowings or
allocated fees during the year ended September 30, 1996.
(6) Financial Instruments
The Portfolio regularly trades in financial instruments with off-
balance sheet risk in the normal course of its investing activities
to assist in managing exposure to various market risks. These
financial instruments include futures contracts and may involve, to
a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent
the investment 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.
<TABLE>
<CAPTION>
A summary of obligations under these financial instruments at
September 30, 1996 is as follows:
Futures Contracts Net Unrealized
Expiration Date Contracts Position Depreciation
- ----------------- ---------- -------- ---------------
<S> <C> <C> <C>
12/96 279 U.S. Treasury Bonds Short $308,728
========
At September 30, 1996, the Portfolio had sufficient cash and/or
securities to cover margin requirements on open futures contracts.
</TABLE>
Independent Auditors' Report
To the Trustees and Investors of
Massachusetts Municipals Portfolio:
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of
Massachusetts Municipals Portfolio as of September 30, 1996, and the
related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period ended September 30, 1996 and the supplementary data for each
of the three years in the period ended September 30, 1996 and for
the period from the start of business February 1, 1993 to September
30, 1993. These financial statements and supplementary data are the
responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and supplementary
data based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at September
30, 1996, by correspondence with the custodians and brokers. 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
the Massachusetts Municipals Portfolio at September 30, 1996, the
results of its operations, the changes in its net assets, and its
supplementary data for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 1, 1996
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Investment ManagementFund
Fund
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspaper of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School
of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Portfolio
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President and Portfolio Manager
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspaper of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School
of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Portfolio Investment Adviser
Boston Management and Research
24 Federal Street
Boston, MA 02110
Fund Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus
which contains more complete information on the Funds, including
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
MMBSRC-11/96
