<PAGE>
[EATON VANCE Investing
LOGO APPEARS for the EDUCATION
HERE] 21st [PHOTO OF WALL
Century APPEARS HERE]
Annual Report July 31, 1997
EATON VANCE
ARIZONA
MUNICIPALS
[PHOTO OF HIGHWAY COLORADO
APPEARS HERE] TRUST
CONNECTICUT
MICHIGAN
TRADITIONAL
MINNESOTA
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
NEW JERSEY
PENNSYLVANIA
[PHOTO OF BRIDGE TEXAS
APPEARS HERE]
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
President
The municipal bond market has continued to respond favorably in 1997 to an
economic climate characterized by moderate growth and low inflation. First
quarter GDP rose 4.9%, while the second quarter logged growth of 3.6%, according
to preliminary estimates. Meanwhile, inflation has remained in the 2-to-3%
range. While the Federal Reserve elected to raise short-term rates slightly in
March, it has since maintained a generally stable interest rate policy in
response to a benign inflation outlook. Not surprisingly, municipal bonds have
turned in solid returns, with the Lehman Brothers Municipal Bond Index* -an
unmanaged index of municipal bonds-rising 10.3% during the year ended July 31,
1997.
The municipal bond market has been characterized by heavy issuance and strong
investor demand.
According to Standard & Poor's, nearly $227 billion in municipal securities were
brought to market in 1996, a 14% increase from the prior year. Thus far in 1997,
municipal issuance has kept up that pace. Issuers have redeemed older bonds with
relatively high coupons and replaced them with new bonds bearing lower coupons.
This municipal refunding activity has been sparked in part by the strong market
rally of recent months that has seen yields for 30-year AAA-rated general
obligations decline to the 5.2% level at July 31, according to Bloomberg
Financial. At that level, municipal yields represent 80.9% of 30-year Treasury
yields, making them an attractive option for investors.
Amid Washington's newly found fiscal responsibility, the outlook for municipal
bonds appears bright.
We believe the long-term outlook for municipal bonds has improved in the past
year for several reasons. First, with Congress and the Clinton Administration
having reached agreement on a
Municipal bonds yield 81% of Treasury yields
[BAR CHART APPEARS HERE]
30-Year AAA-rated
General Obligation (GO) Bonds* 5.20%
Taxable equivalent yield
in 36% tax bracket 8.13%
30-Year Treasury bond 6.43%
Principal and interest payments of Treasury securities are guaranteed by the
U.S. government.
*GO yields are a compilation of a representative variety of general obligations
and are not necessarily representative of the Fund's yield. Statistics as of
July 31, 1997.
Past performance is not indicative of future results.
Source: Bloomberg, L.P.
plan to balance the budget by 2002, the budgetary nightmare that has long
plagued the nation may soon be history. A balanced budget would sharply reduce
the government's borrowing needs, leading to lower interest rates and channeling
investments into more productive areas of the economy. Second, even after recent
capital gains tax cut proposals, the marginal tax rates of many taxpayers remain
high. For those taxpayers, municipal bonds may still be the best vehicle for tax
relief. And finally, a balanced investment portfolio features a mix of equities,
bonds, and cash. We believe, that following three years of stock market
outperformance, investors should consider reallocating a portion of their
portfolios to bonds in order to maintain a prudent asset allocation. For these
reasons, we believe that the municipal market will continue to attract
investments from tax-conscious investors. Eaton Vance will continue its
leadership role in seeking high, tax-free income for investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter,
President
September 9, 1997
*It is not possible to invest directly in the Index.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured 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>
EV Traditional Arizona Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON APPEARS HERE]
Cynthia J. Clemson,
Portfolio Manager
The Economy
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. Economic growth in Arizona has been revised upward in recent months, as growth
has exceeded most estimates. Revised figures show that the state ranked third
in the nation in job creation in 1996, posting an increase of 100,000 non-
agricultural jobs, for a 5.6% employment growth rate.
. Tourism is an increasingly important segment of the Arizona economy. For
example, Tucson alone hosted 2.5 million visitors last year, according to the
Tucson Convention and Visitors Bureau. The economic impact has been
staggering, with 36,500 jobs directly or indirectly tied to the city's tourism
industry.
. Not surprisingly, Arizona's population growth has mirrored its strong economy,
rising by 133,000 in 1996. After the resident population neared full
employment in the early stages of the recovery, word of labor shortages
reached other regions of the country, encouraging an influx of new job
seekers.
Management Update
- --------------------------------------------------------------------------------
. During the past year, we have emphasized increasing the yield of the Fund. We
found good value in the multi-family housing sector, where issuance increased
by around 30%. We also found some opportunities among non-rated, continuing
life-care facilities.
. Amid volatile trading, we used market selloffs as an opportunity to sell
prerefunded bonds - those prerefunded to an earlier call date - in favor of
bonds with better upside performance characteristics.
. As is characteristic of the Arizona market, supply was steady but limited
during the past year. New issuance was concentrated in school district bonds,
which tend to have shorter maturities than we generally prefer for the
Portfolio. Health care issuance was up sharply, however, providing some
compelling opportunities.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 10.7%./1/
This return resulted from an increase in net asset value per share to $10.09
on July 31, 1997 from $9.61 on July 31, 1996, and the reinvestment of $0.514
per share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.09 per
share, the Fund's distribution rate on July 31, 1997 was 5.10%. The Fund's
SEC yield at July 31 was 4.47%./3/
. To equal 5.10% in a taxable investment, a couple in the 39.58% combined
federal and state tax bracket would need a yield of 8.44%.
Your Investment at Work
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Yuma, AZ Industrial Development Authority [GRAPHIC APPEARS HERE]
Yuma Regional Medical Center Revenue Bonds
. This revenue bond financed the building and renovation of several Yuma
Regional Medical Center facilities as well as the maintenance of additional
administrative offices.
. With its 5.5% coupon, the bond increased the Fund's potential for capital
appreciation. In addition, the bond provides 10 years of call protection,
contributing to our continuing emphasis on good call characteristics.
. Given the recent flood of health care issuance, the Yuma issue stood out for
its coupon, high quality, and good underlying structure.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect a maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
/*/ Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/13/93. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- ------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
One Year 10.7%
Life of Fund 5.4
SEC Average Annual Total Returns (including maximum sales charge)
- ------------------------------------------------------------------
One Year 6.6%
Life of Fund 4.3
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 From December 31, 1993,
Investment in the Fund vs. the Lehman Brothers through July 31, 1997
Municipal Bond Index*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Traditional
Lehman Brothers Arizona Fund, including
Municipal Municipal Fund, maximum
DATE Bond Index of net asset value sales charge
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/93 $10,000 $10,000 $ 9,625
1/31/94 $10,114 $10,099 $ 9,721
2/28/94 $ 9,852 $ 9,898 $ 9,527
3/31/94 $ 9,451 $ 9,401 $ 9,048
4/30/94 $ 9,531 $ 9,442 $ 9,088
5/31/94 $ 9,614 $ 9,515 $ 9,158
6/30/94 $ 9,558 $ 9,442 $ 9,089
7/31/94 $ 9,730 $ 9,658 $ 9,296
8/31/94 $ 9,764 $ 9,680 $ 9,317
9/30/94 $ 9,621 $ 9,485 $ 9,129
10/31/94 $ 9,450 $ 9,196 $ 8,852
11/30/94 $ 9,279 $ 8,935 $ 8,600
12/31/94 $ 9,483 $ 9,224 $ 8,879
1/31/95 $ 9,754 $ 9,602 $ 9,242
2/28/95 $10,038 $ 9,968 $ 9,594
3/31/95 $10,153 $10,057 $ 9,680
4/30/95 $10,165 $10,066 $ 9,689
5/31/95 $10,490 $10,391 $10,002
6/30/95 $10,398 $10,216 $ 9,833
7/31/95 $10,496 $10,279 $ 9,894
8/31/95 $10,630 $10,394 $10,004
9/30/95 $10,697 $10,445 $10,054
10/31/95 $10,852 $10,628 $10,229
11/30/95 $11,032 $10,875 $10,468
12/31/95 $11,138 $11,014 $10,601
1/31/96 $11,223 $11,077 $10,662
2/28/96 $11,147 $10,957 $10,547
3/31/96 $11,004 $10,773 $10,369
4/30/96 $10,973 $10,719 $10,318
5/31/96 $10,969 $10,701 $10,300
6/30/96 $11,088 $10,816 $10,411
7/31/96 $11,189 $10,922 $10,513
8/31/96 $11,186 $10,926 $10,517
9/30/96 $11,343 $11,100 $10,684
10/31/96 $11,471 $11,196 $10,776
11/30/96 $11,681 $11,382 $10,956
12/31/96 $11,632 $11,340 $10,916
1/31/97 $11,654 $11,368 $10,942
2/28/97 $11,761 $11,496 $11,065
3/31/97 $11,604 $11,348 $10,923
4/30/97 $11,701 $11,468 $11,039
5/31/97 $11,877 $11,638 $11,202
6/30/97 $12,004 $11,748 $11,308
7/31/97 $12,336 $12,086 $11,634
</TABLE>
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- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 98.62% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
3
<PAGE>
EV Traditional Colorado Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF WILLIAM AHERN APPEARS HERE]
William Ahern,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Colorado's economy has reflected the strength at the national level, with the
state's unemployment rate, which has hovered near the 4% level for three
years, expected to fall to the 3.7% by year-end. In 1997, the state is
expected to create 65,000 new jobs, according to the Office of Planning and
Budget.
. Colorado's population growth, fueled in recent years by a large migration from
other states, has slowed from a peak of 3% in 1993 to a 2% growth rate last
year, for a net gain of 73,000 residents. Slower population growth is
attributed to an economic rebound in the Pacific coast states.
. Reflecting the strong economy, Colorado state fund revenues increased more
than 8% in fiscal year 1997. The jump in revenues was most pronounced in
personal income tax receipts, which rose an impressive 11%.
Management Update
- --------------------------------------------------------------------------------
. In a market increasingly dominated by insured issues, we have sought
opportunities to add higher-yielding bonds to the Portfolio. Colorado housing
issues provided some especially attractive opportunities among non-rated
bonds.
. We have pursued a "barbell" approach with respect to coupon structure. By
adding to our zero-coupon bond holdings, we have increased the Fund's
potential for capital appreciation and improved the balance with our high-
yielding bond holdings.
. Call protection remained an important structural concern for the Portfolio. As
issuers have redeemed bonds with lower coupon paper, the need to maintain good
call protection has become even more acute.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 11.7%./1/
This return resulted from an increase in net asset value per share to $9.92 on
July 31, 1997 from $9.37 on July 31, 1996, and the reinvestment of $0.514 per
share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.92 per
share, the Fund's distribution rate on July 31, 1997 was 5.19%. The Fund's
SEC yield at July 31 was 4.82%./3/
. To equal 5.19% in a taxable investment, a couple in the 39.20% combined
federal and state tax bracket would need a yield of 8.54%.
Your Investment at Work
- --------------------------------------------------------------------------------
Colorado Health Facilities Authority Parkview Episcopal Medical Center, Inc.
[GRAPHIC APPEARS HERE]
. The proceeds from this bond issue were used to construct and equip certain
facilities of the 305-bed Medical Center, as well as to refund an earlier bond
issue of the Center.
. Because quality spreads in the Colorado market have become especially narrow,
we sought opportunities among lower-rated, investment grade hospital bonds
like this 6.125% coupon, Baa1-rated (Moody's) issue.
. The Parkview bond was consistent with our recent relative value approach and
helped us improve the Portfolio's structure by adding to call protection.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
/*/ Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/10/93. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 11.7%
Life of Fund 5.1
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 7.5%
Life of Fund 4.0
[LINE GRAPH APPEARS HERE]
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Fund Index*
From December 31, 1993, through July 31, 1997
<TABLE>
<CAPTION>
EV Traditional Colorado
Municipals Fund, at Fund, including Lehman Brothers
Date net asset value maximum sales charge Municipal Bond 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
8/31/96 $10,667 $10,269 $11,186
9/30/96 $10,819 $10,414 $11,343
10/31/96 $10,927 $10,518 $11,471
11/30/96 $11,114 $10,699 $11,681
12/31/96 $11,095 $10,680 $11,632
1/31/97 $11,135 $10,718 $11,654
2/28/97 $11,239 $10,819 $11,761
3/31/97 $11,126 $10,710 $11,604
4/30/97 $11,212 $10,792 $11,701
5/31/97 $11,371 $10,945 $11,877
6/30/97 $11,588 $11,155 $12,004
7/31/97 $11,940 $11,494 $12,336
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.41% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
4
<PAGE>
EV Traditional Connecticut Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF NICOLE ANDERES APPEARS HERE]
Nicole Anderes,
Portfolio Manager
The Economy
. Connecticut's recovery from the 1989-92 recession continued in 1997, although
the state continued to lag national trends. Most of the state's employment
gains have come in the business services area, including finance, software and
internet services, as well as health services. Retail and construction have
also been good job providers.
. Connecticut's labor force has grown by more than 1% in the past year, but at a
slower pace than the nation as a whole. The state's unemployment rate was well
below last year's levels. It has generally remained higher than the national
rate throughout the expansion.
. At mid-year, state tax receipts were roughly 5% higher than the same period
last year. Personal income tax and sales tax revenues each showed significant
growth over 1996. Corporate tax receipts, in contrast, were more than 9% below
last year's levels.
Management Update
- --------------------------------------------------------------------------------
. Reflecting a bond market characterized by choppy, interim fluctuations, the
Portfolio remained neutrally positioned for much of the past fiscal year and
featured relatively little trading activity.
. The Portfolio was able to use our extensive research resources to identify
opportunities to add yield for our shareholders as well as to avoid
deteriorating situations before they were recognized in the market.
. Insured bonds now constitute nearly half of all new municipal issuance, making
it more difficult to find good buying opportunities. We believe that insurers
will not be able to maintain their recent level of market penetration
indefinitely and that more interesting values will eventually emerge.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 10.1%./1/
This return resulted from an increase in net asset value per share to $10.64
on July 31, 1997 from $10.20 on July 31, 1996, and the reinvestment of $0.555
per share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.64 per
share, the Fund's distribution rate on July 31, 1997 was 5.17%. The Fund's
SEC yield at July 31 was 4.63%./3/
. To equal 5.17% in a taxable investment, a couple in the 38.88% combined
federal and state tax bracket would need a yield of 8.46%.
Your Investment at Work
- --------------------------------------------------------------------------------
Connecticut Health and Educational [GRAPHIC APPEARS HERE]
Facilities Authority - Choate Rosemary Hall
. This bond issue financed the renovation of student and faculty residences as
well as the maintenance of other administrative facilities at this well-
regarded college preparatory school founded in 1890.
. With its 5% coupon, the bond provided the Fund with added upside potential
while also improving the Fund's call protection. Concurrently, we sold other
5% coupon issues with less attractive call characteristics.
. The bond was a high-quality addition to the Portfolio. In addition to
representing a respected issuer, the bond is insured by MBIA, a major
municipal bond insurer. /4/
- --------------------------------------------------------------------------------
/1/This return does not include the Fund's maximum 3.75% initial sales charge.
/2/A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/Private insurance does not decrease the risk of loss of principal
associated with this investment.
/5/Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
/*/Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
4/19/94. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/5/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- -----------------------------------------------------------------
One Year 10.1%
Life of Fund 7.8
SEC Average Annual Total Returns (including maximum sales charge)
- -----------------------------------------------------------------
One Year 5.9%
Life of Fund 6.5
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 From April 30, 1994, through
Investment in the Fund vs. the Lehman July 31, 1997
Brothers Municipal Bond Index(R)
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Traditional Fund,
Lehman Brothers Connecticut Including
Municipal Bond Municipals Fund, maximum
Date Index at net asset value sales charge
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
4/30/94 $10,000 $10,000 $ 9,625
5/31/94 $10,087 $10,138 $ 9,757
6/30/94 $10,028 $10,034 $ 9,658
7/31/94 $10,209 $10,255 $ 9,871
8/31/94 $10,244 $10,275 $ 9,889
9/30/94 $10,094 $10,139 $ 9,759
10/31/94 $ 9,915 $ 9,861 $ 9,491
11/30/94 $ 9,735 $ 9,518 $ 9,161
12/31/94 $ 9,949 $ 9,807 $ 9,439
1/31/95 $10,234 $10,170 $ 9,789
2/28/95 $10,532 $10,509 $10,115
3/31/95 $10,653 $10,603 $10,205
4/30/95 $10,665 $10,621 $10,223
5/31/95 $11,005 $10,906 $10,497
6/30/95 $10,909 $10,775 $10,371
7/31/95 $11,012 $10,860 $10,453
8/31/95 $11,152 $11,020 $10,607
9/30/95 $11,223 $11,114 $10,698
10/31/95 $11,386 $11,276 $10,853
11/30/95 $11,575 $11,502 $11,071
12/31/95 $11,686 $11,600 $11,165
1/31/96 $11,774 $11,653 $11,216
2/28/96 $11,695 $11,538 $11,105
3/31/96 $11,545 $11,370 $10,943
4/30/96 $11,513 $11,366 $10,940
5/31/96 $11,508 $11,387 $10,960
6/30/96 $11,634 $11,507 $11,075
7/31/96 $11,739 $11,606 $11,171
8/31/96 $11,736 $11,614 $11,179
9/30/96 $11,900 $11,770 $11,328
10/31/96 $12,035 $11,893 $11,447
11/30/96 $12,255 $12,061 $11,609
12/31/96 $12,204 $12,023 $11,573
1/31/97 $12,227 $12,021 $11,570
2/28/97 $12,339 $12,153 $11,697
3/31/97 $12,174 $12,043 $11,592
4/30/97 $12,276 $12,132 $11,677
5/31/97 $12,461 $12,282 $11,821
6/30/97 $12,594 $12,419 $11,953
7/31/97 $12,943 $12,774 $12,295
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.66% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
5
<PAGE>
EV Traditional Michigan Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Michigan's economy rose in concert with the national trends, with employment
reaching new record highs. Once again, the service, trade and construction
sectors led the way in job creation. Meanwhile, Big Three auto makers, a
critical source of manufacturing employment, enjoyed strong sales of pickup
trucks and sport utility vehicles.
. Detroit continued its success story, boosted by the strong auto sector and
sharp rise in commercial construction. The city's job growth rate for the year
was a robust 2.3%, well above national levels. Reflecting that growth, the
city's residential property values have risen 13% in the past year alone.
. The state remains in sound fiscal health. With its Budget Stabilization Fund
at more than 7% of general revenues, the state has a good measure of financial
flexibility. Through sound management and an improving economic picture,
Michigan continues to merit a Aa-rating from Moody's.
Management Update
- --------------------------------------------------------------------------------
. While maintaining a fully-invested posture and a fairly long duration, we made
adjustments to the Portfolio to compensate for market volatility, including
using bond futures as a hedge against a market downturn.
. Amid very large issuance, local school district bonds underperformed during
the period. As a result, we shifted our focus to the hospital sector, which
offered attractive opportunities to add yield to the Portfolio.
. We added to the Portfolio's non-rated and lower-rated investment-grade bonds.
Eaton Vance's research depth gives us an advantage in that sector of the
market. We also found value in alternative minimum tax bonds, which typically
carry higher yields.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 9.1%./1/
This return resulted from an increase in net asset value per share to $9.75 on
July 31, 1997 from $9.41 on July 31, 1996, and the reinvestment of $0.495 per
share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.75 per
share, the Fund's distribution rate on July 31, 1997 was 5.09%. The Fund's
SEC yield at July 31 was 3.53%./3/
. To equal 5.09% in a taxable investment, a couple in the 40.02% combined
federal and state tax bracket would need a yield of 8.49%.
Your Investment at Work
- --------------------------------------------------------------------------------
Pittsfield MI Economic Development Corp. [ART
Arbor Hospice APPEARS HERE]
. These bonds were issued to finance the purchase and construction costs of
Arbor Hospice, a facility near Ann Arbor dedicated to the continuing care of
critically ill patients.
. The Arbor Hospice bond is a good example of a municipal bond investment used
to fund a novel solution to a major health care challenge.
. This bond is representative of the Portfolio's efforts, in a market
increasingly dominated by local school district bonds, to find opportunities
in smaller, non-rated health care issues.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/7/93. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 9.1%
Life of Fund 4.4
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 5.0%
Life of Fund 3.3
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV TRADITIONAL FUND,
MICHIGAN MUNICIPALS INCLUDING LEHMAN BROTHERS
FUND, MAXIMUM MUNICIPAL
DATE OF NET ASSET VALUE SALES CHARGE BOND 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
8/31/96 10,663 10,264 11,186
9/30/96 10,823 10,418 11,343
10/31/96 10,917 10,508 11,471
11/30/96 11,113 10,697 11,681
12/31/96 11,058 10,644 11,632
1/31/97 11,037 10,624 11,654
2/28/97 11,152 10,734 11,761
3/31/97 11,002 10,590 11,604
4/30/97 11,109 10,693 11,701
5/31/97 11,288 10,866 11,877
6/30/97 11,396 10,969 12,004
7/31/97 11,660 11,224 12,336
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.11% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
6
<PAGE>
EV Traditional Minnesota Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Minnesota benefited from its broad economic diversity as manufacturing,
services, and natural resources posted strong employment growth. Iron and oil
production facilities have been running at high capacity, while forest
products companies have also fared well. Computer and software makers have
paced the manufacturing segment.
. Minnesota's construction employment in the first half of 1997 was 4% above the
same period in 1996, the result of strong building activity in the public,
commercial and residential sectors.
. Due to its strong economy and sound financial condition, Minnesota general
obligations have been upgraded to Aaa/AAA by Moody's and Standard & Poor's,
two major rating agencies.
Management Update
- --------------------------------------------------------------------------------
. The Portfolio featured relatively few changes during the period, focusing on
structural adjustments. We added to the Portfolio's zero coupon holdings in
order to improve the Fund's upside potential.
. Elsewhere on the structural front, call protection remained an important
consideration. As interest rates have declined, more bonds have been redeemed
by issuers. We have upgraded the Fund's call protection to avoid these
untimely redemptions as well as to increase the Fund's capital appreciation
potential.
. Issuance in the Minnesota market was characteristically quiet, dominated by
school districts. We were able to find good value in some college and
university issues. These were generally smaller, research-driven situations.
While many of these bonds were non-rated, they nonetheless met our strict
investment criteria.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 9.7%./1/
This return resulted from an increase in net asset value per share to $9.77 on
July 31, 1997 from $9.40 on July 31, 1996, and the reinvestment of $0.514 per
share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.77 per
share, the Fund's distribution rate on July 31, 1997 was 5.27%. The Fund's
SEC yield at July 31 was 4.72%./3/
. To equal 5.27% in a taxable investment, a couple in the 41.44% combined
federal and state tax bracket would need a yield of 9.00%.
Your Investment at Work
- --------------------------------------------------------------------------------
Minnesota State Higher Education
Facilities Authority - University of St. Thomas
[GRAPHIC APPEARS HERE]
. These revenue bonds were issued to finance upgrades on the University's St.
Paul and Minneapolis campuses, including a new telecommunications system,
increased heating capacity, and an expanded physical plant headquarters.
. The college and university sector of the Minnesota market offered good value.
With a 5.4% coupon, the St. Thomas bond represents good upside potential if
interest rates were to decline.
. As part of our ongoing efforts to improve the Portfolio's call protection, the
bond features a 10-year call, a strong positive given the decline in rates.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost.
/*/ Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/9/93. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 9.7%
Life of Fund 4.6
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 5.6%
Life of Fund 3.5
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From December 31, 1993, through July 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Traditional Minnesota
Lehman Brothers Municipals Fund, Fund, including
Date Municipal Bond Index at net asset value maximum sales charge
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/93 $10,000 $10,000 $9,627
1/31/94 $10,114 $10,095 $9,718
2/28/94 $9,852 $9,875 $9,506
3/31/94 $9,451 $9,401 $9,050
4/30/94 $9,531 $9,424 $9,072
5/31/94 $9,614 $9,528 $9,173
6/30/94 $9,558 $9,448 $9,095
7/31/94 $9,730 $9,613 $9,254
8/31/94 $9,764 $9,637 $9,277
9/30/94 $9,621 $9,464 $9,111
10/31/94 $9,450 $9,209 $8,865
11/30/94 $9,279 $8,919 $8,586
12/31/94 $9,483 $9,208 $8,864
1/31/95 $9,754 $9,501 $9,146
2/28/95 $10,038 $9,824 $9,458
3/31/95 $10,153 $9,934 $9,564
4/30/95 $10,165 $9,913 $9,543
5/31/95 $10,490 $10,162 $9,783
6/30/95 $10,398 $9,988 $9,615
7/31/95 $10,496 $10,040 $9,665
8/31/95 $10,630 $10,176 $9,796
9/30/95 $10,697 $10,228 $9,846
10/31/95 $10,852 $10,399 $10,011
11/30/95 $11,032 $10,603 $10,208
12/31/95 $11,138 $10,753 $10,352
1/31/96 $11,223 $10,761 $10,360
2/28/96 $11,147 $10,675 $10,276
3/31/96 $11,004 $10,456 $10,066
4/30/96 $10,973 $10,481 $10,090
5/31/96 $10,969 $10,508 $10,116
6/30/96 $11,088 $10,589 $10,194
7/31/96 $11,189 $10,684 $10,285
8/31/96 $11,186 $10,631 $10,234
9/30/96 $11,343 $10,782 $10,380
10/31/96 $11,471 $10,878 $10,472
11/30/96 $11,681 $11,053 $10,641
12/31/96 $11,632 $11,000 $10,589
1/31/97 $11,654 $11,027 $10,616
2/28/97 $11,761 $11,143 $10,728
3/31/97 $11,604 $10,995 $10,585
4/30/97 $11,701 $11,104 $10,690
5/31/97 $11,877 $11,251 $10,831
6/30/97 $12,004 $11,360 $10,936
7/31/97 $12,336 $11,723 $11,286
</TABLE>
Federal income tax information on distributions. For Federal income tax
purposes, 99.34% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
7
<PAGE>
EV Traditional New Jersey Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
New Jersey's unemployment rate was 5.5% in July, up slightly from the recent low
of 5.2% in April. The rise was generally attributed to an increased labor force.
Even with the slight increase, the jobless picture has improved significantly in
the past year. The rate stood at 6.1% a year ago.
. New Jersey ranked second among all states in terms of per capita income in
1996, according to the Commerce Department. The state's per capita income of
$31,053 was 28% higher than the national average and represented a 4.1%
increase from the previous year.
. Trade and services continued to pace job creation in New Jersey, with health
and recreation services especially robust. The construction sector was also
very strong, paced by new home sales running 20% above last year's levels.
Management Update
- --------------------------------------------------------------------------------
. We added to the Fund's zero coupon holdings as part of an effort to reduce the
Fund's average coupon and improve the Fund's upside potential. Zero coupons
helped balance the Fund's higher coupons and should improve performance in a
varying range of interest rate scenarios.
. In a continued generic market, we increased our efforts to find undervalued,
non-rated bonds that can improve the Fund's yield. The growing life-care
sector has presented an increasing number of opportunities.
. Amid increased supply, we found some good opportunities among lower-rated,
investment-grade hospitals, where yield spreads remained fairly attractive.
Issues such as Cooper Health System and Holy Name Hospital offered especially
good value.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 10.9%./1/
This return resulted from an increase in net asset value per share to $10.53
on July 31, 1997 from $10.05 on July 31, 1996, and the reinvestment of $0.582
per share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.53 per
share, the Fund's distribution rate on July 31, 1997 was 5.51%. The Fund's
SEC yield at July 31 was 4.76%./3/
. To equal 5.51% in a taxable investment, a couple in the 40.08% combined
federal and state tax bracket would need a yield of 9.20%.
Your Investment at Work
- --------------------------------------------------------------------------------
New Jersey Economic Development Auth. [GRAPHIC APPEARS HERE]
St. Barnabas Medical Center
. The bonds funded the purchase and renovation of two buildings in the St.
Barnabas Medical Center, a 620-bed, acute care teaching hospital in
Livingston.
. As part of recent structural changes, we lowered the average coupon to improve
the Fund's upside potential. This zero-coupon bond helped to balance some of
the Fund's older, higher-coupon issues.
. As a non-callable bond, the St. Barnabas issue aided our efforts to lengthen
the Fund's call protection during a period of increased redemption activity.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect maximum 3.75% sales charge. Past performance is not indicative of
future results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
/*/ Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 4/13/94. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
One Year 10.9%
Life of Fund 7.7
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 6.8%
Life of Fund 6.5
Comparison of Change in Value of a $10,000 From April 30, 1994,
Investment in the Fund vs. the Lehman Brothers through July 31, 1997
Municipal Bond Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Traditional New Jersey Fund, Including Lehman Brothers
Municipals Fund, at maximum sales Municipal Bond
Date net asset value charge 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
8/31/96 $11,616 $11,178 $11,736
9/30/96 $11,787 $11,342 $11,900
10/31/96 $11,892 $11,443 $12,035
11/30/96 $12,076 $11,620 $12,255
12/31/96 $12,029 $11,575 $12,204
1/31/97 $12,052 $11,597 $12,227
2/28/97 $12,141 $11,683 $12,339
3/31/97 $12,057 $11,601 $12,174
4/30/97 $12,174 $11,714 $12,276
5/31/97 $12,329 $11,864 $12,461
6/30/97 $12,447 $11,977 $12,594
7/31/97 $12,847 $12,362 $12,943
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.69% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
8
<PAGE>
EV Traditional Pennsylvania Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Pennsylvania economy generated further momentum during the past year as
job creation showed continuing signs of improvement, rising by 2%. The
commonwealth's 5.2% unemployment rate, while still hovering slightly above the
national rate, was significantly lower than a year earlier.
. The service sector was responsible for seven of every eight new jobs in
Pennsylvania. According to the Pennsylvania Department of Labor and Industry,
more than 60,000 new service jobs were created in the past year, led by
business services and health care. Retail and finance were also large job
providers.
. Pennsylvania's manufacturers have seen expanding business, especially building
products makers, due to a busier construction schedule. The tourism industry,
meanwhile, boosted by a strong economy and favorable weather, has enjoyed a
banner year, as vacationers have visited historic sites in record numbers.
Management Update
- --------------------------------------------------------------------------------
. In this volatile period, the Portfolio gained a measure of stability from its
older, higher-coupon holdings. Due to their attractive coupons and shorter
calls, the bonds have shorter durations and exhibit less price volatility.
. The Portfolio maintained its fairly large exposure to Philadelphia hospitals.
Although the field is very competitive, we were able to add yield to the Fund
with BBB rated hospital bonds.
. We took advantage of occasional market sell-offs to add discount issues, which
added duration, positive convexity, and interest rate sensitivity to the Fund.
Finally, we have continued to improve the Fund's call protection, selling
bonds with shorter calls in favor of those with better call characteristics.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 10.5%./1/
This return resulted from an increase in net asset value per share to $10.55
on July 31, 1997 from $10.11 on July 31, 1996, and the reinvestment of $0.584
per share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.55 per
share, the Fund's distribution rate on July 31, 1997 was 5.55%. The Fund's
SEC yield at July 31 was 4.68%./3/
. To equal 5.55% in a taxable investment, a couple in the 42.40% combined
federal, state and personal property tax bracket would need a yield of 9.64%.
Your Investment at Work
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Allegheny County PA Hospital Development Authority - St. Francis Medical
Center Project
. These bonds were issued for a 1000-bed, acute care teaching hospital in
Pittsburgh. In addition to its teaching hospital, St. Francis is a major
provider of specialty health services in the area.
. Projects financed by this issue include the building, renovating and equipping
of the Center's surgical and intensive care facilities.
. With its 5.75% coupon and A rating, the bond was an attractive purchase for
the Portfolio.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect 3.75% sales charge. Past performance is not indicative of future
results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 6/1/94. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 10.5%
Life of Fund 7.8
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 6.4%
Life of Fund 6.5
Comparison of Change in Value of a $10,000 Investment in From June 30, 1994,
the Fund vs. the Lehman Brothers Municipal Bond Index* through July 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Traditional Fund, including Lehman Brothers
Pennsylvania Municipals maximum sales Municipal Bond
Date Fund, of net asset value charge 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 $11,896 $11,476
6/30/96 $11,413 $10,980 $11,602
7/31/96 $11,526 $11,089 $11,707
8/31/96 $11,559 $11,122 $11,704
9/30/96 $11,717 $11,274 $11,867
10/31/96 $11,809 $11,362 $12,002
11/30/96 $11,992 $11,537 $12,221
12/31/96 $11,991 $11,537 $12,170
1/31/97 $12,014 $11,559 $12,193
2/28/97 $12,114 $11,655 $12,305
3/31/97 $11,995 $11,541 $12,141
4/30/97 $12,111 $11,653 $12,242
5/31/97 $12,290 $11,824 $12,427
6/30/97 $12,431 $11,960 $12,559
7/31/97 $12,731 $12,249 $12,907
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.62% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
9
<PAGE>
EV Traditional Texas Municipals Fund as of July 31, 1997
INVESTMENT UPDATE
[PHOTO OF
NICOLE ANDERES
APPEARS HERE]
Nicole Anderes,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The Texas economy continued to prosper in 1997, with the state's employment
growth rate of 3% exceeding the nation's 2.2% growth rate. While unemployment
- at 5.4% in July - remained slightly above the national rate, it was much
improved over the same period a year ago.
. Of the 1.5 million jobs added in Texas over the past five years, more than
half were found in five sectors: business services, local government, health
services, food services, and construction, according to the Texas Office of
the Comptroller.
. Despite weak oil pricing, the Texas energy service and supply sectors have
improved dramatically following years of industry consolidation. The Baker-
Hughes Texas rig count recently totalled 340, up from 270 a year earlier.
Management Update
- --------------------------------------------------------------------------------
. The bond market, characterized by high volatility, lacked clear direction
through much of the year. Accordingly, trading activity was relatively quiet
during the period, with the Portfolio maintaining a neutral position with
respect to interest rates.
. In a choppy market, we were able to draw upon the resources of Eaton Vance's
municipal research department to find opportunities to add yield for our
shareholders (See Texoma Medical Center at right) as well as to avoid several
deteriorating situations before they were recognized in the market.
. With insured bonds increasingly dominating new issuance, it has become more
challenging to find good buying opportunities. It's likely that more
opportunities will emerge if the insurers are unable to maintain their current
high market share.
The Fund
- --------------------------------------------------------------------------------
. During the year ended July 31, 1997, the Fund had a total return of 10.6%./1/
This return resulted from an increase in net asset value per share to $9.77 on
July 31, 1997 from $9.32 on July 31, 1996, and the reinvestment of $0.504 per
share in tax-free income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.77 per
share, the Fund's distribution rate on July 31, 1997 was 5.17%. The Fund's
SEC yield at July 31 was 4.59%./3/
. To equal 5.17% in a taxable investment, a couple in the 36% federal tax
bracket would need a yield of 8.08%.
Your Investment at Work
- --------------------------------------------------------------------------------
Denison, TX Hospital Authority
Texoma Medical Center, Inc. Project
[GRAPHIC APPEARS HERE]
. Proceeds of this issue were used to finance capital improvements and equipment
purchases for Texoma Medical Center, which operates acute care and tertiary
care facilities in Denison, as well as to refund earlier issues of the
Authority.
. Texoma enjoys a dominant market share in its area and is winning more managed
care contracts. The Center has improved its profitability in the past year.
. This bond, recently upgraded to BBB+ by S&P, represents the efforts of the
Portfolio to add value through lower-rated bonds that may have further upgrade
potential.
- --------------------------------------------------------------------------------
/1/ This return does not include the Fund's maximum 3.75% initial sales charge.
/2/ A portion of the Fund's income could be subject to federal income tax and/or
alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect 3.75% sales charge. Past performance is not indicative of future
results. The value of an investment in the Fund may fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/8/93. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
Index.
- --------------------------------------------------------------------------------
Fund Information
as of July 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 10.6%
Life of Fund 4.8
SEC Average Annual Total Returns (including maximum sales charge)
- --------------------------------------------------------------------------------
One Year 6.5%
Life of Fund 3.7
[LINE GRAPH APPEARS HERE]
Comparison of Change in Value of a $10,000 Investment in the Fund vs. Lehman
Brothers Municipal Bond Index*
From December 31, 1993, through July 31, 1997
<TABLE>
<CAPTION>
EV Traditional Texas Fund, Including Lehman Brothers
Municipals Fund, at maximum sales Municipal Bond
Date net asset value charge 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
8/31/96 $10,755 $10,351 $11,186
9/30/96 $10,884 $10,475 $11,343
10/31/96 $10,968 $10,557 $11,471
11/30/96 $11,110 $10,693 $11,681
12/31/96 $11,113 $10,696 $11,632
1/31/97 $11,152 $10,733 $11,654
2/28/97 $11,257 $10,834 $11,761
3/31/97 $11,165 $10,746 $11,604
4/30/97 $11,251 $10,828 $11,701
5/31/97 $11,398 $10,970 $11,877
6/30/97 $11,532 $11,099 $12,004
7/31/97 $11,862 $11,417 $12,336
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions. For Federal income tax
purposes, 99.82% of the total dividends paid by the Fund from net investment
income during the year ended July 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
10
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- -----------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio --
Identified cost $ 1,759,372 $ 1,534,736 $ 2,589,690 $ 1,029,442
Unrealized appreciation 105,967 154,386 148,370 105,076
- -----------------------------------------------------------------------------------------------------------------------------
Total investment, at value (Note 1A) $ 1,865,339 $ 1,689,122 $ 2,738,060 $ 1,134,518
- -----------------------------------------------------------------------------------------------------------------------------
Receivable from Administrator (Note 4) $ 15,422 $ 16,306 $ 18,361 $ 14,153
Receivable for Fund shares sold -- 96 -- --
Deferred organization expenses (Note 1D) 2,829 2,366 3,551 2,965
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,883,590 $ 1,707,890 $ 2,759,972 $ 1,151,636
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 3,655 $ 3,083 $ 8,815 $ 3,578
Payable for Fund shares redeemed -- 25,120 -- 749
Accrued expenses 6,149 6,692 4,842 5,970
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 9,804 $ 34,895 $ 13,657 $ 10,297
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets $ 1,873,786 $ 1,672,995 $ 2,746,315 $ 1,141,339
- -----------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 1,877,329 $ 1,663,598 $ 2,600,209 $ 1,329,576
Accumulated net realized gain (loss) from
portfolio (computed on the basis of
identified cost) (109,440) (149,541) 2,560 (298,839)
Accumulated undistributed (distributions
in excess of) net investment income (70) 4,552 (4,824) 5,526
Net unrealized appreciation of investments
(computed on the basis of
identified cost) 105,967 154,386 148,370 105,076
- -----------------------------------------------------------------------------------------------------------------------------
Total $ 1,873,786 $ 1,672,995 $ 2,746,315 $ 1,141,339
- -----------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- -----------------------------------------------------------------------------------------------------------------------------
185,763 168,584 258,003 117,072
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
- -----------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial
interest outstanding) $ 10.09 $ 9.92 $ 10.64 $ 9.75
- -----------------------------------------------------------------------------------------------------------------------------
Computation of Offering Price
- -----------------------------------------------------------------------------------------------------------------------------
Offering price per share (100 / 96.25) $ 10.48 $ 10.31 $ 11.05 $ 10.13
- -----------------------------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price is reduced.
</TABLE>
See notes to financial statements
11
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ----------------------------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio --
Identified cost $ 2,404,924 $ 5,583,582 $ 4,860,427 $ 320,027
Unrealized appreciation 208,144 282,362 214,513 12,509
- ----------------------------------------------------------------------------------------------------------------
Total investment, at value (Note 1A) $ 2,613,068 $ 5,865,944 $ 5,074,940 $ 332,536
- ----------------------------------------------------------------------------------------------------------------
Receivable from the Administrator (Note 4) $ 18,678 $ 18,607 $ 8,375 $ 17,321
Receivable for Fund shares sold -- 79,238 42,209 9,626
Deferred organization expenses (Note 1D) 3,642 2,911 -- 3,096
- ----------------------------------------------------------------------------------------------------------------
Total assets $ 2,635,388 $ 5,966,700 $ 5,125,524 $ 362,579
- ----------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------
Distributions payable $ 5,726 $ 15,050 $ 9,759 $ 858
Payable for Fund shares redeemed 86,737 -- 5,791 3,944
Accrued expenses 6,753 6,550 5,697 5,140
- ----------------------------------------------------------------------------------------------------------------
Total liabilities $ 99,216 $ 21,600 $ 21,247 $ 9,942
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 2,536,172 $ 5,945,100 $ 5,104,277 $ 352,637
- ----------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------------------------------
Paid-in capital $ 2,592,589 $ 5,698,593 $ 4,892,679 $ 419,242
Accumulated net realized loss from
portfolio (computed on the basis of
identified cost) (274,987) (30,202) (4,082) (77,968)
Accumulated undistributed (distributions in
excess of) net investment income 10,426 (5,653) 1,167 (1,146)
Net unrealized appreciation of investments
(computed on the basis of
identified cost) 208,144 282,362 214,513 12,509
- ----------------------------------------------------------------------------------------------------------------
Total $ 2,536,172 $ 5,945,100 $ 5,104,277 $ 352,637
- ----------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ----------------------------------------------------------------------------------------------------------------
259,560 564,820 483,677 36,091
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
- ----------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest
outstanding) $ 9.77 $ 10.53 $ 10.55 $ 9.77
- ----------------------------------------------------------------------------------------------------------------
Computation of Offering Price Per Share
- ----------------------------------------------------------------------------------------------------------------
Offering price per share (100 / 96.25) $ 10.15 $ 10.94 $ 10.96 $ 10.15
- ----------------------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price is reduced.
</TABLE>
See notes to financial statements
12
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 105,892 $ 134,862 $ 137,273 $ 79,777
Expenses allocated from Portfolio (8,507) (8,066) (11,950) (6,736)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 97,385 $ 126,796 $ 125,323 $ 73,041
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ -- $ -- $ 131 $ --
Transfer and dividend disbursing agent fees 801 3,980 1,543 674
Service fees (Note 5) 2,278 2,494 1,272 2,364
Legal and accounting services 6,869 8,906 8,422 7,311
Printing and postage 3,744 4,338 4,497 3,644
Custodian fee (Note 1E) 3,299 3,198 2,508 3,287
Amortization of organization expenses (Note 1D) 2,062 1,763 2,110 2,190
Registration fees 379 -- -- 1,286
Miscellaneous 2,687 293 -- 2,707
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 22,119 $ 24,972 $ 20,483 $ 23,463
- ------------------------------------------------------------------------------------------------------------------------------------
Deduct --
Allocation of expenses to the Administrator (Note 4) $ 15,422 $ 16,306 $ 18,361 $ 14,153
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 15,422 $ 16,306 $ 18,361 $ 14,153
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 6,697 $ 8,666 $ 2,122 $ 9,310
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 90,688 $ 118,130 $ 123,201 $ 63,731
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 35,649 $ 29,665 $ 12,722 $ 31,159
Financial futures contracts (14,015) (19,424) (8,799) (17,669)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions $ 21,634 $ 10,241 $ 3,923 $ 13,490
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 69,037 $ 113,578 $ 109,737 $ 42,723
Financial futures contracts (5,298) (6,440) (6,633) (3,641)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 63,739 $ 107,138 $ 103,104 $ 39,082
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 85,373 $ 117,379 $ 107,027 $ 52,572
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 176,061 $ 235,509 $ 230,228 $ 116,303
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<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 $ 121,198 $ 297,606 $ 251,823 $ 20,712
Expenses allocated from Portfolio (8,546) (24,369) (19,636) (1,164)
- --------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 112,652 $ 273,237 $ 232,187 $ 19,548
- --------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 131 $ 131 $ -- $ 131
Service fees (Note 5) 2,363 3,636 2,559 702
Transfer and dividend disbursing agent fees 1,285 3,435 2,590 344
Custodian fee (Note 1E) 3,189 3,301 3,324 3,299
Printing and postage 4,847 4,666 2,881 3,161
Legal and accounting services 9,202 8,782 4,048 5,206
Registration fees 307 -- -- --
Amortization of organization expenses (Note 1D) 2,719 1,708 1,043 3,536
Miscellaneous 417 804 4,964 1,948
- --------------------------------------------------------------------------------------------------------------
Total expenses $ 24,460 $ 26,463 $ 21,409 $ 18,327
- --------------------------------------------------------------------------------------------------------------
Deduct --
Allocation of expenses to the Administrator (Note 4) $ 18,678 $ 18,607 $ 8,375 $ 17,293
Reduction of custodian fee (Note 1E) -- -- 2,500 29
- --------------------------------------------------------------------------------------------------------------
Total expense reductions $ 18,678 $ 18,607 $ 10,875 $ 17,322
- --------------------------------------------------------------------------------------------------------------
Net expenses $ 5,782 $ 7,856 $ 10,534 $ 1,005
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 106,870 $ 265,381 $ 221,653 $ 18,543
- --------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 22,761 $ 21,724 $ 25,239 $ (3,327)
Financial futures contracts (13,485) (26,429) (38,753) (2,435)
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions $ 9,276 $ (4,705) $ (13,514) $ (5,762)
- --------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 98,107 $ 261,154 $ 220,174 $ 22,467
Financial futures contracts (15,142) (14,672) (22,893) (1,011)
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 82,965 $ 246,482 $ 197,281 $ 21,456
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 92,241 $ 241,777 $ 183,767 $ 15,694
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 199,111 $ 507,158 $ 405,420 $ 34,237
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Arizona Colorado Connecticut Michigan
Increase (Decrease) in Net Assets Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 90,688 $ 118,130 $ 123,201 $ 63,731
Net realized gain on investment transactions 21,634 10,241 3,923 13,490
Net change in unrealized appreciation (depreciation)
of investments 63,739 107,138 103,104 39,082
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 176,061 $ 235,509 $ 230,228 $ 116,303
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (92,614) $ (117,939) $ (122,917) $ (70,592)
In excess of net investment income (70) -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (92,684) $ (117,939) $ (122,917) $ (70,592)
- -----------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 659,939 $ 796,085 $ 846,386 $ 108,653
Net asset value of shares issued to shareholders
in payment of distributions declared 53,175 74,870 38,324 53,016
Cost of shares redeemed (561,314) (1,645,526) (258,393) (716,996)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions $ 151,800 $ (774,571) $ 626,317 $ (555,327)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 235,177 $ (657,001) $ 733,628 $ (509,616)
- -----------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------
At beginning of year $ 1,638,609 $ 2,329,996 $ 2,012,687 $ 1,650,955
- -----------------------------------------------------------------------------------------------------------------------
At end of year $ 1,873,786 $ 1,672,995 $ 2,746,315 $ 1,141,339
- -----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions
in excess of) net investment income
included in net assets
- -----------------------------------------------------------------------------------------------------------------------
At end of year $ (70) $ 4,552 $ (4,824) $ 5,526
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Minnesota New Jersey Pennsylvania Texas
Increase (Decrease) in Net Assets Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 106,870 $ 265,381 $ 221,653 $ 18,543
Net realized gain (loss) on investment transactions 9,276 (4,705) (13,514) (5,762)
Net change in unrealized appreciation (depreciation)
of investments 82,965 246,482 197,281 21,456
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 199,111 $ 507,158 $ 405,420 $ 34,237
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (107,920) $ (265,381) $ (221,638) $ (18,543)
In excess of net investment income -- (1,611) -- (255)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (107,920) $ (266,992) $ (221,638) $ (18,798)
- ---------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 1,142,469 $ 3,104,783 $ 2,544,332 $ 24,624
Net asset value of shares issued to shareholders
in payment of distributions declared 65,361 117,899 119,010 17,060
Cost of shares redeemed (345,670) (1,006,035) (777,620) (75,906)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions $ 862,160 $ 2,216,647 $ 1,885,722 $ (34,222)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 953,351 $ 2,456,813 $ 2,069,504 $ (18,783)
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 1,582,821 $ 3,488,287 $ 3,034,773 $ 371,420
- ---------------------------------------------------------------------------------------------------------------------------
At end of year $ 2,536,172 $ 5,945,100 $ 5,104,277 $ 352,637
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions
in excess of) net investment income
included in net assets
- ---------------------------------------------------------------------------------------------------------------------------
At end of year $ 10,426 $ (5,653) $ 1,167 $ (1,146)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Increase (Decrease) in Net Assets Arizona Fund Colorado Fund Connecticut Fund Michigan Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 101,163 $ 105,972 $ 85,421 $ 140,825
Net realized gain (loss) on investment transactions 9,396 (2,554) 10,623 42,166
Net 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 2)--
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 3) --
Proceeds from sale 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)
- ------------------------------------------------------------------------------------------------------------------------------------
Net 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>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Traditional Traditional Traditional Traditional
Increase (Decrease) in Net Assets Minnesota Fund New Jersey Fund Pennsylvania Fund Texas Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 132,057 $ 141,323 $ 126,935 $ 21,035
Net realized gain (loss) on investment
transactions 36,862 (4,461) 21,935 (10,988)
Net 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 2)--
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 3) --
Proceeds from sale 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)
- ------------------------------------------------------------------------------------------------------------------------------------
Net 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>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Traditional Arizona Fund
Year Ended July 31,
------------------------------------------------------
1997 1996 1995 1994*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.610 $ 9.510 $ 9.390 $ 10.000
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.502 $ 0.449 $ 0.432 $ 0.253
Net realized and unrealized gain (loss) on investments 0.492 0.129 0.142 (0.563)
- --------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.994 $ 0.578 $ 0.574 $ (0.310)
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.514) $ (0.478) $ (0.432) $ (0.253)
In excess of net investment income --# -- (0.022) (0.047)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.514) $ (0.478) $ (0.454) $ (0.300)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.090 $ 9.610 $ 9.510 $ 9.390
- --------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.66% 6.25% 6.44% (3.23)%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data**
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 1,874 $ 1,639 $ 2,465 $ 2,412
Ratio of net expenses to average daily net assets/(2)//(3)/ 0.88% 1.40% 1.60% 1.75%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 0.87% 1.39% -- --
Ratio of net investment income to average daily net assets 5.17% 4.60% 4.73% 4.14%+
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)//(3)/ 1.75% 2.27% 2.21% 2.93%+
Expenses after custodian fee reduction/(2)/ 1.74% 2.26% -- --
Net investment income 4.30% 3.73% 4.12% 2.96%+
Net investment income per share $ 0.418 $ 0.364 $ 0.376 $ 0.181
<CAPTION>
Traditional Colorado Fund
Year Ended July 31,
-------------------------------------------------------
1997 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.370 $ 9.230 $ 9.180 $ 10.000
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.524 $ 0.471 $ 0.450 $ 0.256
Net realized and unrealized gain (loss) on investments 0.540 0.148 0.062++ (0.761)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.064 $ 0.619 $ 0.512 $ (0.505)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.514) $ (0.479) $ (0.450) $ (0.256)
In excess of net investment income -- -- (0.012) (0.059)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.514) $ (0.479) $ (0.462) $ (0.315)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.920 $ 9.370 $ 9.230 $ 9.180
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 11.74% 6.90% 5.89% (5.22)%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data**
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 1,673 $ 2,330 $ 1,971 $ 2,342
Ratio of net expenses to average daily net assets/(2)//(3)/ 0.81% 1.09% 1.26% 1.38%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 0.77% 1.05% -- --
Ratio of net investment income to average daily net assets 5.45% 5.03% 5.04% 4.20%+
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)//(3)/ 1.56% 2.06% 2.18% 3.18%+
Expenses after custodian fee reduction/(2)/ 1.52% 2.02% -- --
Net investment income 4.70% 4.06% 4.12% 2.40%+
Net investment income per share $ 0.452 $ 0.380 $ 0.368 $ 0.146
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ 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.
# Amount represents less than $0.001 per share.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is
not computed on an annualized basis.
/(2)/ Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the 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 prior periods have not been adjusted to
reflect this change.
See notes to financial statements
19
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Traditional Connecticut Fund
Year Ended July 31,
---------------------------------------------------------
1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.200 $ 10.090 $ 10.100 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.562 $ 0.550 $ 0.553 $ 0.153
Net realized and unrealized gain (loss) on investments 0.433 0.133 0.012 0.111
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.995 $ 0.683 $ 0.565 $ 0.264
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.555) $ (0.550) $ (0.553) $ (0.153)
In excess of net investment income -- (0.023) (0.022) (0.011)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.555) $ (0.573) $ (0.575) $ (0.164)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.640 $ 10.200 $ 10.090 $ 10.100
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.06% 6.87% 5.89% 2.66%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 2,746 $ 2,013 $ 1,115 $ 163
Ratio of net expenses to average daily net assets/(2)//(3)/ 0.61% 0.59% 0.51% 0.48%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 0.61% 0.57% -- --
Ratio of net investment income to average daily net assets 5.37% 5.35% 5.46% 4.83%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income (loss) per share would have
been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)//(3)/ 1.41% 2.11% 3.51% 6.73%+
Expenses after custodian fee reduction/(2)/ 1.41% 2.09% -- --
Net investment income (loss) 4.57% 3.82% 2.46% (1.42)%+
Net investment income (loss) per share $ 0.478 $ 0.393 $ 0.249 $ (0.045)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Traditional Michigan Fund
Year Ended July 31,
---------------------------------------------------------
1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year $ 9.410 $ 9.260 $ 9.220 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.472 $ 0.454 $ 0.419 $ 0.261
Net realized and unrealized gain (loss) on investments 0.363 0.156 0.063 (0.733)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.835 $ 0.610 $ 0.482 $ (0.472)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.495) $ (0.460) $ (0.419) $ (0.261)
In excess of net investment income -- -- (0.023) (0.047)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.495) $ (0.460) $ (0.442) $ (0.308)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.750 $ 9.410 $ 9.260 $ 9.220
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.14% 6.76% 5.52% (4.88)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 1,141 $ 1,651 $ 4,475 $ 6,366
Ratio of net expenses to average daily net assets/(2)//(3)/ 1.21% 1.44% 1.69% 1.69%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.19% 1.43% -- --
Ratio of net investment income to average daily net assets 4.73% 4.62% 4.70% 4.18%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to
the Investment Adviser or Administrator, or both. Had such actions not
been taken, the ratios and net investment income (loss) per share would
have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)//(3)/ 2.26% 2.21% 1.92% 2.11%+
Expenses after custodian fee reduction/(2)/ 2.24% 2.20% -- --
Net investment income (loss) 3.68% 3.84% 4.47% 3.76%+
Net investment income (loss) per share $ 0.367 $ 0.377 $ 0.398 $ 0.235
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* 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.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is
not computed on an annualized basis.
/(2)/ Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the 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 prior periods have not been adjusted to
reflect this change.
See notes to financial statements
20
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Traditional Minnesota Fund
Year Ended July 31,
---------------------------------------------------------
1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.400 $ 9.300 $ 9.370 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.486 $ 0.474 $ 0.440 $ 0.267
Net realized and unrealized gain (loss) on investments 0.398 0.104 (0.048)++ (0.582)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.884 $ 0.578 $ 0.392 $ (0.315)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.514) $ (0.478) $ (0.440) $ (0.267)
In excess of net investment income -- -- (0.022) (0.048)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.514) $ (0.478) $ (0.462) $ (0.315)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.770 $ 9.400 $ 9.300 $ 9.370
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.73% 6.41% 4.45% (3.29)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data **
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 2,536 $ 1,583 $ 3,688 $ 4,952
Ratio of net expenses to average daily net assets/(2)(3)/ 0.75% 1.24% 1.47% 1.51%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 0.72% 1.22% -- --
Ratio of net investment income to average daily net assets 5.38% 4.95% 4.84% 4.33%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income (loss) per share would have
been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)(3)/ 1.69% 2.08% 1.98% 2.45%+
Expenses after custodian fee reduction/(2)/ 1.66% 2.06% -- --
Net investment income (loss) 4.44% 4.10% 4.33% 3.38%+
Net investment income (loss) per share $ 0.401 $ 0.394 $ 0.394 $ 0.209
</TABLE>
<TABLE>
<CAPTION>
Traditional New Jersey Fund
Year Ended July 31,
----------------------------------------------------------
1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.050 $ 9.980 $ 9.940 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.584 $ 0.579 $ 0.576 $ 0.161
Net realized and unrealized gain (loss) on investments 0.478 0.081 0.054 (0.044)++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.062 $ 0.660 $ 0.630 $ 0.117
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.578) $ (0.579) $ (0.576) $ (0.161)
In excess of net investment income (0.004) (0.011) (0.014) (0.016)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.582) $ (0.590) $ (0.590) $ (0.177)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.530 $ 10.050 $ 9.980 $ 9.940
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.92% 6.71% 6.62% 1.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data **
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 5,945 $ 3,488 $ 1,712 $ 296
Ratio of net expenses to average daily net assets/(2)(3)/ 0.70% 0.60% 0.50% 0.43%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 0.68% 0.59% -- --
Ratio of net investment income to average daily net assets 5.65% 5.68% 5.65% 4.11%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income (loss) per share would have
been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)(3)/ 1.10% 1.63% 2.47% 10.59%+
Expenses after custodian fee reduction/(2)/ 1.08% 1.62% -- --
Net investment income (loss) 5.25% 4.65% 3.68% (6.05)%+
Net investment income (loss) per share $ 0.543 $ 0.474 $ 0.375 $ (0.237)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of the per share realized and unrealized gains and losses
at such time.
* 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.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the 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 prior periods have not been adjusted to reflect this change.
See notes to financial statements
21
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Traditional Pennsylvania Fund
Year Ended July 31,
---------------------------------------------------------------
1997 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $10.110 $9.980 $10.050 $10.000
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.583 $0.593 $ 0.577 $0.044
Net realized and unrealized gain (loss) on
investments 0.441 0.122 (0.062)++ 0.104
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.024 $0.715 $ 0.515 $0.148
- ---------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------
From net investment income $(0.584) $(0.585) $ (0.577) $(0.044)
In excess of net investment income -- -- (0.008) (0.054)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions $(0.584) $(0.585) $(0.585) $(0.098)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $10.550 $10.110 $ 9.980 $10.050
- ---------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.46% 7.28% 5.41% 1.49%
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data **
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $5,104 $3,035 $1,487 $ 95
Ratio of net expenses to average daily net
assets/(2)(3)/ 0.88% 0.68% 0.46% 1.69%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction/(2)/ 0.77% 0.53% -- --
Ratio of net investment income to average
daily net assets 5.68% 5.82% 5.58% 2.76%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment advisor fee, an allocation of expenses to the
Investment Adviser or Administrator or both. Had such actions not been
taken, the ratios and net investment income (loss) per share would have been
as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)(3)/ 1.10% 1.93% 3.07% 20.95%+
Expenses after custodian fee reduction/(2)/ 0.99% 1.78% -- --
Net investment income (loss) 5.46% 4.56% 2.97% (16.50)%+
Net investment income (loss) per share $0.560 $0.453 $0.307 $(0.258)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Traditional Texas Fund
Year Ended July 31,
---------------------------------------------------------------
1997 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.320 $9.190 $9.230 $10.000
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.495 $0.453 $0.455 $0.267
Net realized and unrealized gain (loss) on
investments 0.459 0.158 (0.008) (0.709)
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.954 $0.611 $0.447 $(0.442)
- ---------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------
From net investment income $(0.495) $(0.453) $(0.455) $(0.267)
In excess of net investment income (0.009) (0.028) (0.032) (0.061)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions $(0.504) $(0.481) $(0.487) $(0.328)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.770 $ 9.320 $ 9.190 $ 9.230
- ---------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.56% 6.85% 5.16% (4.61)%
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data **
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 353 $ 371 $ 469 $ 1,147
Ratio of net expenses to average daily net
assets/(2)(3)/ 0.65% 1.06% 1.01% 1.08%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction/(2)/ 0.62% 1.01% -- --
Ratio of net investment income to average
daily net assets 5.28% 4.79% 5.25% 4.53%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** The operating expenses of the Funds and the Portfolios may reflect a
reduction of the investment advisor fee, an allocation of expenses to the
Investment Adviser or Administrator or both. Had such actions not been
taken, the ratios and net investment income (loss) per share would have been
as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses /(2)//(3)/ 5.58% 5.79% 3.33% 5.20%+
Expenses after custodian fee reduction /(2)/ 5.55% 5.74% -- --
Net investment income (loss) 0.35% 0.06% 2.93% 0.41%+
Net investment income (loss) per share $ 0.033 $0.007 $0.254 $0.024
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares
and the amount of the per share realized and unrealized gains and losses
at such time.
* 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.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes each Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended July 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the 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 prior periods have not been adjusted to reflect this change.
See notes to financial statements
22
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
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 Funds, eight of which, each non-
diversified, 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 (1.7%, 4.0%, 1.6%, 0.8%, 3.7%, 1.7%, 1.3%, and 1.5%
at July 31, 1997 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.
On June 23, 1997, the Board of Trustees approved a Plan of Reorganization (the
"Plan") for the Eaton Vance Municipals Trust (the "Trust"). Under the terms of
the Plan, the EV Marathon Arizona Municipals Fund, EV Marathon Colorado
Municipals Fund, EV Marathon Connecticut Municipals Fund, EV Marathon Michigan
Municipals Fund, EV Marathon Minnesota Municipals Fund, EV Marathon New Jersey
Municipals Fund, EV Marathon Pennsylvania Municipals Fund and EV Marathon
Texas Municipals Fund (the Successor Funds), separate series of the Eaton
Vance Municipals Trust, would acquire substantially all of the assets and
liabilities of the 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, respectively (the
Acquired Funds). The transactions will be structured for tax purposes to
qualify as a tax-free reorganization under the Internal Revenue Code. The
Trust will issue and deliver to the Acquired Funds a number of full and
fractional shares of beneficial interest of a separate class of the Successor
Fund (Class A Shares), which will be equal in value to the net asset value per
share of the Acquired Fund multiplied by the number of full and fractional
shares of the Acquired Fund then outstanding. Such transaction will occur at
the close of business, July 31, 1997.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of securities by the Portfolios is
discussed in Note 1A of the Portfolios' Notes to Financial Statements which
are included elsewhere in this report.
B Income -- Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with
generally accepted accounting principles.
C Federal Taxes -- Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain. Accordingly, no provision for federal income
or excise tax is necessary. At July 31, 1997, the Funds, for federal income
tax purposes, had capital loss carryovers which will reduce taxable income
arising from future net realized gain, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the amount of the distributions to
shareholders
23
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
which would otherwise be necessary to relieve the Funds of any liability for
Federal income or excise tax. Such capital loss carryovers will be transferred
to the respective Successor Funds upon date of merger and will be available to
the Successor Funds subject to certain limitations. The amounts and normal
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
4,854 July 31, 2002
Traditional Colorado Fund $118,869 July 31, 2004
10,898 July 31, 2003
15,872 July 31, 2002
Traditional Connecticut Fund $ 7,848 July 31, 2005
7,166 July 31, 2004
135 July 31, 2002
Traditional Michigan Fund $127,061 July 31, 2004
36,368 July 31, 2003
63,944 July 31, 2002
Traditional Minnesota Fund $201,237 July 31, 2004
40,089 July 31, 2003
21,596 July 31, 2002
Traditional New Jersey Fund $ 23,676 July 31, 2005
24,264 July 31, 2004
92 July 31, 2002
Traditional Pennsylvania Fund $ 19,327 July 31, 2005
5,691 July 31, 2004
Traditional Texas Fund $ 6,678 July 31, 2005
44,887 July 31, 2004
11,202 July 31, 2002
</TABLE>
Additionally, at July 31, 1997, net capital losses of $1,112, $17,464, $1,315
and $101 for the Traditional Connecticut Fund, Traditional Pennsylvania Fund,
Traditional New Jersey Fund and the Traditional Texas Fund, respectively,
attributable to security transactions incurred after October 31, 1996, are
treated as arising on the first day of the Successor Fund's current taxable
year.
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includible by shareholders
as gross income for Federal income tax purposes because each Fund and
Portfolio intend to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Funds to
pay 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. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Funds or the
Portfolios maintain with IBT. All significant credit balances used to reduce
each Fund's custodian fees are reported as a reduction of expenses on 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 Distributions to Shareholders
------------------------------------------------------------------------------
The net income of each Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest income and capital gain distributions in additional
shares of the Funds 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
24
<PAGE>
EV Traditional Munucipal Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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, 1998 and will be based on tax accounting
methods which may differ from amounts determined for financial statement
purposes.
3 Shares of Beneficial Interest
------------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Traditional Arizona Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 67,585 42,083
Issued to shareholders electing
to receive payments of
distributions in Fund shares 5,447 6,766
Redemptions (57,795) (137,615)
--------------------------------------------------------------------------
Net Increase (Decrease) 15,237 (88,766)
--------------------------------------------------------------------------
<CAPTION>
Traditional Colorado Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 84,564 87,887
Issued to shareholders electing
to receive payments of
distributions in Fund shares 7,880 8,923
Redemptions (172,539) (61,643)
--------------------------------------------------------------------------
Net Increase (Decrease) (80,095) 35,167
--------------------------------------------------------------------------
<CAPTION>
Traditional Connecticut Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 82,182 100,126
Issued to shareholders electing
to receive payments of
distributions in Fund shares 3,712 2,672
Redemptions (25,129) (16,081)
--------------------------------------------------------------------------
Net Increase 60,765 86,717
--------------------------------------------------------------------------
<CAPTION>
Traditional Michigan Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 11,348 23,719
Issued to shareholders electing
to receive payments of
distributions in Fund shares 5,591 11,018
Redemptions (75,283) (342,589)
--------------------------------------------------------------------------
Net Decrease (58,344) (307,852)
--------------------------------------------------------------------------
<CAPTION>
Traditional Minnesota Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 120,594 52,427
Issued to shareholders electing
to receive payments of
distributions in Fund shares 6,907 7,328
Redemptions (36,386) (287,853)
--------------------------------------------------------------------------
Net Increase (Decrease) 91,115 (228,098)
--------------------------------------------------------------------------
<CAPTION>
Traditional New Jersey Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 306,617 210,185
Issued to shareholders electing
to receive payments of
distributions in Fund shares 10,437 6,541
Redemptions (99,165) (41,325)
--------------------------------------------------------------------------
Net Increase 217,889 175,401
--------------------------------------------------------------------------
<CAPTION>
Traditional Pennsylvania Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 247,839 234,880
Issued to shareholders electing
to receive payments of
distributions in Fund shares 11,592 5,953
Redemptions (75,861) (89,658)
--------------------------------------------------------------------------
Net Increase 183,570 151,175
--------------------------------------------------------------------------
<CAPTION>
Traditional Texas Fund
------------------------------------
Year Ended July 31,
1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Sales 2,525 12,298
Issued to shareholders electing
to receive payments of
distributions in Fund shares 1,810 1,993
Redemptions (8,076) (25,461)
--------------------------------------------------------------------------
Net Decrease (3,741) (11,170)
--------------------------------------------------------------------------
</TABLE>
25
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT,D
4 Transactions with Affiliates
------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Funds for the year
ended July 31, 1997, $15,422, $16,306, $18,361, $14,153, $18,678, $18,607,
$8,375 and $17,293 of expenses relating 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 EVM and BMR. 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 such
investment adviser fee earned by BMR.
5 Service Plan
------------------------------------------------------------------------------
Each Fund has adopted a service plan (the Plans) designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and the
service fee requirements of the revised sales charge rule of the National
Association of Securities Dealers Inc. The Plans provide that each Fund may
make service fee payments to the Principal Underwriter, Eaton Vance
Distributors, Inc. (EVD), a subsidiary of Eaton Vance Management, Authorized
Firms or other persons in amounts not exceeding 0.25% of each Fund's average
daily net assets for any fiscal year. The Trustees have initially implemented
the Plans by authorizing the Funds to make quarterly service fee payments to
the Principal Underwriter and Authorized Firms in amounts not expected to
exceed 0.20% of the Funds' 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 twelve months. Such payments are made for personal
services and/or the maintenance of shareholder accounts. For the year ended
July 31, 1997, 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 paid or accrued service fees of $2,278, $2,494, $1,272,
$2,364, $2,363, $3,636, $2,559 and $702, respectively.
Certain of the officers and Trustees of the Funds are officers and directors
of EVD.
6 Investment Transactions
------------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended July 31, 1997 were as follows:
<TABLE>
<CAPTION>
Traditional Arizona Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 688,476
Decreases 627,171
<CAPTION>
Traditional Colorado Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 816,141
Decreases 1,684,494
<CAPTION>
Traditional Connecticut Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 872,325
Decreases 357,986
<CAPTION>
Traditional Michigan Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 161,990
Decreases 782,546
<CAPTION>
Traditional Minnesota Fund
------------------------------------------------------------------------------
<S> <C>
Increases $1,169,866
Decreases 318,834
<CAPTION>
Traditional New Jersey Fund
------------------------------------------------------------------------------
<S> <C>
Increases $3,059,025
Decreases 1,175,960
<CAPTION>
Traditional Pennsylvania Fund
------------------------------------------------------------------------------
<S> <C>
Increases $2,564,495
Decreases 887,445
<CAPTION>
Traditional Texas Fund
------------------------------------------------------------------------------
<S> <C>
Increases $ 43,927
Decreases 93,594
</TABLE>
26
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
Eaton Vance Municipals Trust:
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of EV
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, 1997, the related statements of operations for
the year then ended, the statements of changes in net assets for the years ended
July 31, 1997 and 1996 and financial highlights for the years ended July 31,
1997, 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 the
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, 1997, 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
September 5, 1997
27
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 1.6%
- -------------------------------------------------------------------------
NR NR $1,800 Arizona Health Facilities
Authority, (Mesa Project),
7.625%, 1/1/26 $ 1,802,268
- -------------------------------------------------------------------------
$ 1,802,268
- -------------------------------------------------------------------------
Education -- 6.6%
- -------------------------------------------------------------------------
NR NR $2,000 Arizona Educational Loan
Marketing Corp., (AMT),
6.25%, 6/1/06 $ 2,152,920
NR NR 2,000 Arizona Educational Loan
Marketing Corp., (AMT),
6.30%, 12/1/08 2,134,540
A NR 1,500 Arizona Student Loan
Acquisition Authority,
(AMT), 7.625%, 5/1/10 1,678,920
A1 AA 1,250 University of Arizona,
6.25%, 6/1/11 1,363,000
- -------------------------------------------------------------------------
$ 7,329,380
- -------------------------------------------------------------------------
Electric Utilities -- 11.9%
- -------------------------------------------------------------------------
A A+ $1,000 Commonwealth of Puerto
Rico, Telephone Authority,
Variable Rate, 1/1/20/(1)/ $ 1,106,250
Ba2 BB+ 3,500 Maricopa County, AZ,
Pollution Control, 6.375%,
8/15/23 3,637,514
Baa1 BBB+ 5,300 Navajo County, AZ,
Pollution Control, 5.875%,
8/15/28 5,427,941
Baa1 BBB+ 550 Puerto Rico Electric Power
Authority, 7.00%, 7/1/07 591,168
Baa1 BBB+ 370 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 397,184
Aa AA 1,000 Salt River Project
Agricultural Improvement
and Power District, 5.25%,
1/1/19 1,001,170
Aa AA 1,000 Salt River Project
Agricultural Improvement
and Power District, 6.25%,
1/1/27 1,074,090
- -------------------------------------------------------------------------
$ 13,235,317
- -------------------------------------------------------------------------
Escrowed / Prerefunded -- 10.8%
- -------------------------------------------------------------------------
Aaa AA $1,000 Arizona Transportation
Board Highway, 6.50%,
7/1/11 $ 1,116,000
NR AAA 1,000 Glendale, AZ, Industrial
Development Authority,
7.125%, 7/1/20 1,186,430
Aaa AAA 7,500 Maricopa County, AZ,
Single Family Mortgage,
0.00%, 2/1/16 2,836,800
Aaa AAA 1,750 Phoenix, AZ, Civic
Improvement Excise Tax,
(MBIA), 6.60%, 7/1/08 1,993,128
Aaa AAA 5,000 Phoenix, AZ, Industrial
Development Authority,
IDA, Single Family, 0.00%,
12/1/14 2,034,650
NR AA 2,500 Phoenix, AZ, Street and
Highway User, 6.25%, 7/1/11 2,798,775
- -------------------------------------------------------------------------
$ 11,965,783
- -------------------------------------------------------------------------
General Obligations -- 6.2%
- -------------------------------------------------------------------------
Aa1 AA+ $2,000 Phoenix, AZ, 5.25%, 7/1/20 $ 2,021,100
Aa1 AA+ 1,500 Phoenix, AZ, 6.375%, 7/1/13 1,651,755
Baa1 A 1,000 Puerto Rico Aqueduct and
Sewer Authority, 5.00%,
7/1/19 966,370
NR A 2,000 Tatum Ranch, AZ,
6.875%, 7/1/16 2,206,780
- -------------------------------------------------------------------------
$ 6,846,005
- -------------------------------------------------------------------------
Hospitals -- 4.3%
- -------------------------------------------------------------------------
NR BBB $1,130 Arizona Health Facilities
Authority, (Phoenix
Memorial Hospital),
8.125%, 6/1/12 $ 1,239,497
NR BBB 1,250 Arizona Health Facilities,
(Phoenix Memorial
Hospital), 8.20%, 6/1/21/(2)/ 1,374,450
Baa1 BBB- 1,000 Maricopa County, AZ, (Sun
Health Corporation),
8.125%, 4/1/12 1,178,070
NR NR 905 Winslow, AZ, Industrial
Development Authority
(Winslow Memorial
Hospital), 9.50%, 6/1/22 1,022,931
- -------------------------------------------------------------------------
$ 4,814,948
- -------------------------------------------------------------------------
Housing -- 9.9%
- -------------------------------------------------------------------------
NR A $2,250 Maricopa County, AZ, IDA,
(Greenery Apartments),
6.625%, 7/1/26 $ 2,350,305
NR A 2,000 Maricopa County, AZ, IDA,
(Laguna Point Apartments),
6.75%, 7/1/19 2,096,660
NR A 3,000 Maricopa County, AZ, IDA,
Multi-family, 6.625%,
1/1/27 3,150,630
NR NR 1,250 Maricopa County, AZ, IDA,
Place Five and The
Greenery Projects,
8.625%, 1/1/11 1,273,638
</TABLE>
See notes to financial statements
28
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- --------------------------------------------------------------------------------
NR AA $1,000 Phoenix, AZ, (Woodstone
and Silver Springs
Apartments), Multi-family
Housing, (Asset Guaranty),
6.25%, 4/1/23 $ 1,033,680
NR AAA 1,000 Tempe, AZ, Industrial
Development Authority,
(Quadrangle Village
Apartments), 6.25%, 6/1/26 1,035,540
- --------------------------------------------------------------------------------
$10,940,453
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 1.9%
- --------------------------------------------------------------------------------
A1 NR $1,000 Casa Grande, AZ, Pollution
Control, (Frito Lay,
Inc.), 6.60%, 12/1/10 $ 1,100,090
A2 A 1,000 Greenlee County, AZ,
Pollution Control, (Phelps
Dodge Corp.), 5.45%, 6/1/09 1,036,730
- --------------------------------------------------------------------------------
$ 2,136,820
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.0%
- --------------------------------------------------------------------------------
Aaa AAA $2,910 Pima County, AZ,
(Irvington Power), (FGIC),
7.25%, 7/15/10 $ 3,271,044
- --------------------------------------------------------------------------------
$ 3,271,044
- --------------------------------------------------------------------------------
Insured-General Obligations -- 8.2%
- --------------------------------------------------------------------------------
NR AAA $1,500 Commonwealth of Puerto
Rico "RIBS", (AMBAC),
Variable
Rate, 7/1/15/(1)/ $ 1,663,125
Aaa AAA 1,000 Commonwealth of Puerto
Rico, Variable Rate,
(FSA), 7/1/20/(1)/ 1,102,500
Aaa AAA 1,000 Maricopa County, AZ,
Alhambra Elementry School
District (AMBAC), 5.625%,
7/1/13 1,046,390
Aaa AAA 1,000 Maricopa County, AZ,
Alhambra School District
(AMBAC),
5.125%, 7/1/13 1,011,080
Aaa AAA 1,000 Maricopa County, AZ,
Chandler Unified School
District (FGIC), 6.40%,
7/1/10 1,083,380
Aaa AAA 1,000 Maricopa County, AZ,
School District, (MBIA),
6.40%, 7/1/10 1,083,750
Aaa AAA 1,000 Maricopa County, AZ,
Tolleson High School
District (MBIA),
5.00%, 7/1/13 1,003,200
Aaa AAA 1,000 Puerto Rico (FSA),
Variable
Rate, 7/1/22(1) 1,116,250
- --------------------------------------------------------------------------------
$ 9,109,675
- --------------------------------------------------------------------------------
Insured-Hospitals -- 17.8%
- --------------------------------------------------------------------------------
Aaa AAA $2,140 Arizona Health Facilities
Authority, (MBIA), 5.25%,
10/1/26 $ 2,111,517
Aaa AAA 2,000 Maricopa County, AZ,
Hospital District No. 1,
(FGIC),
6.125%, 6/1/15 2,139,400
- --------------------------------------------------------------------------------
Aaa AAA 2,000 Maricopa County, AZ,
Samaritan Health, (MBIA),
7.00%, 12/1/16 2,491,900
Aaa AAA 2,000 Mohave County, AZ, (Kingman
Regional MedicalCenter)
(FGIC), 6.50%, 6/1/15 2,187,080
Aaa AAA 1,000 Pima County, AZ,
(Carondelet Health Care
Corp.) (MBIA),
5.25%, 7/1/12 1,047,500
Aaa AAA 3,500 Pima County, AZ, (Tucson
Medical Center) (MBIA),
5.00%, 4/1/15 3,443,300
Aaa AAA 1,500 Pima County, AZ, (Tucson
Medical Center) (MBIA),
6.375%, 4/1/12 1,640,790
Aaa AAA 1,000 Pima County, AZ,
Industrial Development
Authority, (MBIA), 5.25%,
7/1/11 1,050,450
Aaa AAA 1,500 Scottsdale, AZ, Industrial
Development Authority,
(AMBAC), 6.125%, 9/1/17 1,640,175
Aaa AAA 1,000 University of Arizona
Medical Center Corp.
(MBIA), 5.00%, 7/1/21 963,490
Aaa AAA 1,000 Yuma, AZ, Industrial
Development Authority,
(MBIA), 5.50%, 8/1/17 1,025,630
- --------------------------------------------------------------------------------
$19,741,232
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.0%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Chandler, AZ, Water and
Sewer (FGIC), 6.25%, 7/1/13 $ 1,089,200
Aaa AAA 1,200 Phoenix, AZ, (Civic
Improvement Corp.) (MBIA),
5.00%, 7/1/18 1,171,056
- --------------------------------------------------------------------------------
$ 2,260,256
- --------------------------------------------------------------------------------
Special Tax Revenue -- 1.9%
- --------------------------------------------------------------------------------
Baa1 A $1,000 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.50%, 7/1/36 $ 1,022,450
NR NR 1,000 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 1,109,010
- --------------------------------------------------------------------------------
$ 2,131,460
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
29
<PAGE>
Arizona Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- 4.8%
- --------------------------------------------------------------------------------
NR BBB $3,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 3,233,670
Baa3 BBB- 2,000 Puerto Rico Port
Authority, (American
Airlines), (AMT), 6.25%,
6/1/26 2,145,520
- --------------------------------------------------------------------------------
$ 5,379,190
- --------------------------------------------------------------------------------
Water and Sewer -- 9.1%
- --------------------------------------------------------------------------------
Aa1 AA+ $2,000 Arizona Wastewater
Management Authority,
6.80%, 7/1/11 $ 2,247,080
A1 AA- 1,000 Central Arizona Water
Conservation District,
5.50%, 11/1/09 1,083,490
Aa3 A 5,000 Phoenix, AZ, (Civic
Improvement Corp.), 4.75%,
7/1/23 4,588,299
Aa3 A 1,100 Phoenix, AZ, (Civic
Improvement Corp.), 5.00%,
7/1/18 1,066,648
A1 A+ 1,000 Tuscon, AZ, Water Systems,
6.50%, 7/1/16 1,085,960
- --------------------------------------------------------------------------------
$ 10,071,477
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $100,333,893) $ 111,035,308
- --------------------------------------------------------------------------------
</TABLE>
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, 1997, 32.8% 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 2.0% to 17.1% of total
investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
30
<PAGE>
Colorado Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 1.3%
- ------------------------------------------------------------------------
NR BBB $ 500 Guam Power Authority,
6.625%, 10/1/14 $ 544,340
- ------------------------------------------------------------------------
$ 544,340
- ------------------------------------------------------------------------
Escrowed / Prerefunded -- 9.9%
- ------------------------------------------------------------------------
NR AAA $4,000 Colorado Health Facilities
Authority, (Liberty
Heights), (FSA),
0.00%, 7/15/24 $ 933,920
Aa2 NR 1,000 Colorado Housing and
Finance Authority,
Retirement Housing,
(Liberty Heights Project),
(AMT), 7.55%, 11/1/27 1,128,280
Aaa NR 8,500 Dawson Ridge, Metropolitan
District #1, Douglas
County, CO, 0.00%, 10/1/22 2,122,365
- ------------------------------------------------------------------------
$ 4,184,565
- ------------------------------------------------------------------------
General Obligations -- 2.6%
- ------------------------------------------------------------------------
A1 AA $1,000 Boulder and Gilpin
Counties, Boulder Valley
School District,
6.30%, 12/1/13 $ 1,100,090
- ------------------------------------------------------------------------
$ 1,100,090
- ------------------------------------------------------------------------
Hospitals -- 18.9%
- ------------------------------------------------------------------------
NR NR $ 900 Colorado Health Facilities
Authority, (Cleo Wallace
Center), 7.00%, 8/1/15 $ 935,577
NR BBB- 650 Colorado Health Facilities
Authority, (National Jewish
Center For Immunology and
Respiratory Medicine),
6.875%, 2/15/12 675,428
Baa1 NR 2,000 Colorado Health Facilities
Authority, (Parkview
Memorial Hospital), 6.125%,
9/1/25 2,053,580
Baa BBB 2,050 Colorado Health Facilities
Authority, (Rocky Mountain
Adventist Heathcare),
6.625%, 2/1/13 2,174,681
NR BBB 2,000 Colorado Health Facilities
Authority, (Vail Valley
Medical Center),
6.60%, 1/15/20 2,116,300
- ------------------------------------------------------------------------
$ 7,955,566
- ------------------------------------------------------------------------
Housing -- 15.4%
- ------------------------------------------------------------------------
NR AAA $1,000 City of Lakewood,
Multi-family Housing, FHA
Insured Mortgage Loan,
(AMT), 6.65%, 10/1/25 $ 1,058,980
Aa AA 750 Colorado Housing and
Finance Authority,
Multi-family Mortgage
Revenue, MFMR, (AMT),
6.40%, 10/1/27 789,615
Aa2 NR 1,510 Colorado Housing and
Finance Authority, Single
Family Access Program,
7.90%, 12/1/24 1,697,285
Aa2 NR 805 Colorado Housing and
Finance Authority, Single
Family Access Program,
8.00%, 12/1/24 916,831
Aa2 NR 565 Colorado Housing and
Finance Authority, Single
Family Housing, (AMT),
7.65%, 12/1/25 636,393
NR AAA 1,000 Denver, CO, Multifamily
Housing, (Lofts Project),
(AMT), 6.15%, 12/1/16 1,037,060
NR NR 345 Lake Creek Affordable
Housing Corp.,
Multi-family, 8.00%, 12/1/23 363,951
- ------------------------------------------------------------------------
$ 6,500,115
- ------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 2.9%
- ------------------------------------------------------------------------
A2 NR $1,250 Commonwealth of Puerto Rico
Industrial, Medical and
Environmental Pollution
Control Facility Finance
Authority (American Home
Products), 5.10%, 12/1/18 $ 1,227,588
- ------------------------------------------------------------------------
$ 1,227,588
- ------------------------------------------------------------------------
Insured-Electric Utilities -- 2.1%
- ------------------------------------------------------------------------
Aaa AAA $ 300 Commonwealth of Puerto Rico
Electric Power Authority,
(FSA), Variable
Rate, 7/1/03/(1)/ $ 342,375
Aaa AAA 500 Commonwealth of Puerto
Rico, Telephone Authority,
(MBIA), Variable Rate,
1/16/15/(1)/ 520,625
- ------------------------------------------------------------------------
$ 863,000
- ------------------------------------------------------------------------
Insured-General Obligations -- 11.9%
- ------------------------------------------------------------------------
Aaa AAA $1,000 Douglas and Elbert
Counties, Douglas County
School District, (MBIA),
6.40%, 12/15/11 $ 1,132,960
Aaa AAA 1,750 Eagle, Garfield and Routt
Counties, School District
No. RE 50J, (FGIC), 6.30%,
12/1/12 1,952,545
</TABLE>
See notes to financial statements
31
<PAGE>
Colorado Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations (continued)
- --------------------------------------------------------------------------------
Aaa AAA $1,160 Highlands Ranch
Metropolitan District No.2,
(FSA), 6.50%, 6/15/10(2) $ 1,363,568
- --------------------------------------------------------------------------------
Aaa AAA 1,265 Larimer, Weld and Boulder
County, CO, (FGIC), 0.00%,
12/15/12 578,067
- --------------------------------------------------------------------------------
$ 5,027,140
- --------------------------------------------------------------------------------
Insured-Housing -- 2.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Thornton, SCA
Realty MFMR, (FSA), 7.10%,
1/1/30 $ 1,095,930
- --------------------------------------------------------------------------------
$ 1,095,930
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Broomfield Sales
and Use Tax, (AMBAC),
6.30%, 12/1/14 $ 1,086,410
- --------------------------------------------------------------------------------
$ 1,086,410
- --------------------------------------------------------------------------------
Insured-Transportation -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Denver,CO, (Denver
International Airport),
(AMT), (MBIA),
5.75%, 11/15/15 $ 776,715
- --------------------------------------------------------------------------------
$ 776,715
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Municipal Subdistrict,
Northern Colorado Water
Conservancy District,
(AMBAC), 5.00%, 12/1/17 $ 971,340
- --------------------------------------------------------------------------------
$ 971,340
- --------------------------------------------------------------------------------
Special Tax Revenue -- 4.3%
- --------------------------------------------------------------------------------
Baa1 A $1,750 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 $ 1,789,288
- --------------------------------------------------------------------------------
$ 1,789,288
- --------------------------------------------------------------------------------
Transportation -- 18.9%
- --------------------------------------------------------------------------------
Baa3 BB+ $2,000 Denver, CO, (United
Airlines), (AMT), 6.875%,
10/1/32 $ 2,155,060
Baa1 BBB 1,500 Denver, CO, Airport System
Revenue, (AMT), 6.75%,
11/15/22 1,613,130
Baa1 BBB 750 Denver, CO, Airport System
Revenue, (AMT), 7.00%,
11/15/25 800,040
Baa1 BBB 500 Denver, CO, Airport System
Revenue, (AMT), 7.50%,
11/15/23 581,160
NR NR $ 500 Eagle County, CO, (Eagle
County Airport Terminal
Project), (AMT), 7.50%,
5/1/21 530,760
NR BBB 750 Guam Airport Authority,
(AMT), 6.60%, 10/1/10 808,635
NR BBB 100 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 107,789
Baa3 BBB- 1,250 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 1,340,950
- --------------------------------------------------------------------------------
$ 7,937,524
- --------------------------------------------------------------------------------
Water and Sewer -- 2.5%
- --------------------------------------------------------------------------------
NR NR $1,000 Cottonwood Water and
Sanitation District, 7.75%,
12/1/20 $ 1,038,040
- --------------------------------------------------------------------------------
$ 1,038,040
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments --100%
(identified cost $38,187,386) $42,097,651
- --------------------------------------------------------------------------------
</TABLE>
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 Colorado
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 28.1% 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 institutions ranged from 4.6% to 8.9% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
32
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 8.8%
- -------------------------------------------------------------------------
NR BBB- $4,775 Connecticut Health and
Education Facilities
Authority, (Quinnipiac
College), 6.00%, 7/1/23 $ 4,834,640
Baa3 BBB- 1,000 Connecticut HEFA, (Sacred
Heart University), 5.80%,
7/1/23 990,680
Ba2 BBB- 5,500 Connecticut HEFA,
(University of Hartford),
6.80%, 7/1/22 5,651,854
Aaa AAA 3,400 Connecticut HEFA, (Yale
University), Variable
Rate, 6/10/30/(1)/ 3,672,000
- -------------------------------------------------------------------------
$ 15,149,174
- -------------------------------------------------------------------------
Electric Utilities -- 5.0%
- -------------------------------------------------------------------------
NR BBB $1,100 Guam Power Authority,
6.625%, 10/1/14 $ 1,197,548
NR NR 3,625 Guam Power Authority
Revenue Bonds, 6.30%,
10/1/22 3,783,630
NR NR 3,365 Virgin Islands Water and
Power Authority, 7.40%,
7/1/11 3,652,909
- -------------------------------------------------------------------------
$ 8,634,087
- -------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.5%
- -------------------------------------------------------------------------
NR A $1,000 Connecticut HEFA, (Sacred
Heart University), 6.80%,
7/1/12 $ 1,128,530
A1 AAA 645 Connecticut Special Tax
Obligation Bonds, (STOB),
Transportation
Infrastructure Purposes,
6.50%, 7/1/09 687,080
NR AA- 650 State of Connecticut,
General Obligations Bonds,
6.875%, 7/15/10 711,913
- -------------------------------------------------------------------------
$ 2,527,523
- -------------------------------------------------------------------------
General Obligations -- 1.6%
- -------------------------------------------------------------------------
Aa2 AA $1,270 City of Danbury, 4.50%,
2/1/14 $ 1,196,492
NR BBB 500 Government of Guam,
5.40%, 11/15/18 494,345
Aa3 AA- 1,750 State of Connecticut,
Capital Appreciation
Bonds,
0.00%, 11/1/09 974,698
- -------------------------------------------------------------------------
$ 2,665,535
- -------------------------------------------------------------------------
Hospitals -- 8.6%
- -------------------------------------------------------------------------
Baa2 NR $5,400 Connecticut HEFA, (Griffin
Hospital), 5.75%, 7/1/23 $ 5,349,402
NR BBB- 2,000 Connecticut HEFA, (New
Britan Memorial Hospital),
7.75%, 7/1/22 2,173,580
NR A+ 1,100 Connecticut HEFA, (William
W. Backus Hospital),
6.00%, 7/1/12 1,142,108
NR A+ 5,780 Connecticut HEFA, (William
W. Backus Hospital),
6.375%, 7/1/22 6,125,296
- -------------------------------------------------------------------------
$ 14,790,386
- -------------------------------------------------------------------------
Housing -- 12.4%
- -------------------------------------------------------------------------
Aa AA $1,695 Connecticut HFA, MRB,
6.35%, 5/15/17 $ 1,785,716
Aa AA 210 Connecticut HFA, MRB,
6.55%, 11/15/13 220,886
Aa AA 2,490 Connecticut HFA, MRB,
6.60%, 11/15/23 2,627,946
Aa AA 5,315 Connecticut HFA, MRB,
6.70%, 11/15/12 5,668,340
Aa AA 1,685 Connecticut HFA, MRB,
6.75%, 11/15/23 1,792,840
Aa AA 200 Connecticut HFA, MRB,
7.00%, 11/15/09 212,262
Aa AA 15 Connecticut HFA, MRB,
7.625%, 11/15/17 15,400
Aa AA 3,000 Connecticut HFA, MRB,
6.20%, 5/15/14 3,133,230
Aa AA 4,735 Connecticut HFA, MRB,
(AMT), 6.20%, 11/15/22 4,927,241
Aa AA 755 Connecticut HFA, MRB,
(AMT), 6.90%, 5/15/20 808,250
Aa NR 100 Connecticut HFA, MRB,
(AMT), 7.40%, 11/15/99 102,353
- -------------------------------------------------------------------------
$ 21,294,464
- -------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 2.5%
- -------------------------------------------------------------------------
Aaa AAA $1,000 Connecticut Development
Authority PCR, (Pfizer
Inc.), 6.55%, 2/15/13 $ 1,099,750
NR NR 3,065 Connecticut Development
Authority, Airport
Facility, (Signature
Flight), (AMT), 6.625%,
12/1/14 3,181,930
- -------------------------------------------------------------------------
$ 4,281,680
- -------------------------------------------------------------------------
</TABLE>
See notes to financial statements
33
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------ Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 5.4%
- --------------------------------------------------------------------------------
Aaa AAA $4,000 Connecticut HEFA, (Choate
Rosemary College), (MBIA),
5.00%, 7/1/27 $ 3,885,000
Aaa AAA 1,555 Connecticut HEFA, (Choate
Rosemary College), (MBIA),
6.80%, 7/1/15/(2)/ 1,786,415
Aaa AAA 1,000 University of Connecticut,
(FGIC), 5.00%, 2/1/16 986,940
Aaa AAA 2,525 University of Connecticut,
(MBIA), 5.25%, 4/1/14 2,577,874
- --------------------------------------------------------------------------------
$ 9,236,229
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $3,160 Connecticut Municipal
Electric Energy
Cooperative Bonds (MBIA),
5.00%, 1/1/18 $ 3,080,937
- --------------------------------------------------------------------------------
$ 3,080,937
- --------------------------------------------------------------------------------
Insured-General Obligations -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of New Britain,
(MBIA), 6.00%, 3/1/12 $ 1,128,150
Aaa AAA 1,000 Puerto Rico Commonwealth,
(MBIA), 5.375%, 7/1/25 1,009,520
- --------------------------------------------------------------------------------
$ 2,137,670
- --------------------------------------------------------------------------------
Insured-Hospitals -- 9.1%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Connecticut HEFA,
(Bridgeport Hospital),
(MBIA), 6.625%, 7/1/18 $ 1,108,350
Aaa AAA 1,000 Connecticut HEFA, (Danbury
Hospital), (AMBAC),
5.375%, 7/1/17 1,008,290
Aaa AAA 1,000 Connecticut HEFA,
(Hospital of St. Raphael),
(AMBAC), 6.50%, 7/1/11 1,180,040
Aaa AAA 1,500 Connecticut HEFA,
(Hospital of St. Raphael),
(AMBAC), 6.625%, 7/1/14 1,643,535
Aaa AAA 5,750 Connecticut HEFA,
(Lawrence and Memorial
Hospital), (MBIA),
5.00%, 7/1/22 5,504,993
Aaa AAA 2,965 Connecticut HEFA,
(Veterans Memorial Medical
Center), (MBIA), 5.375%,
7/1/15 3,029,993
Aaa AAA 2,000 Connecticut HEFA, (Yale-New
Haven Hospital),
(MBIA), 6.50%, 7/1/12 2,205,780
- --------------------------------------------------------------------------------
$ 15,680,981
- --------------------------------------------------------------------------------
Insured-Housing -- 0.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 305 Puerto Rico Housing
Finance Corp., (AMBAC),
7.50%, 10/1/11 $ 318,984
- --------------------------------------------------------------------------------
$ 318,984
- --------------------------------------------------------------------------------
Insured-Transportation -- 5.6%
- --------------------------------------------------------------------------------
Aaa AAA $8,200 State of Connecticut,
Airport Revenue Bonds,
(Bradley International),
(FGIC), 7.65%, 10/1/12 $ 9,634,835
- --------------------------------------------------------------------------------
$ 9,634,835
- --------------------------------------------------------------------------------
Nursing Homes -- 14.2%
- --------------------------------------------------------------------------------
NR NR $1,240 Connecticut Development
Authority, (Baptist
Homes), 9.00%, 9/1/22 $ 1,408,826
A2 NR 9,000 Connecticut Development
Authority, Health Care
Bonds, (Duncaster), 6.75%,
9/1/15 9,754,292
A1 AA- 720 Connecticut HEFA, (NHP),
(Highland View), (AMT),
7.00%, 11/1/07 830,484
A1 AA- 1,305 Connecticut HEFA, (NHP),
(Sharon Healthcare),
6.25%, 11/1/14 1,417,139
A1 AA- 655 Connecticut HEFA, (NHP),
(St. Camillus), 6.25%,
11/1/18 706,306
A1 AA- 3,250 Connecticut HEFA, (NHP),
(St. Joseph's Manor),
6.25%, 11/1/16 3,514,843
A1 AA- 335 Connecticut HEFA, (NHP),
(Wadsworth Glen), (AMT),
7.00%, 11/1/07 386,406
A1 AA- 2,000 Connecticut HEFA, (NHP),
(Wadsworth Glen), (AMT),
7.50%, 11/1/16 2,336,700
A1 AA- 3,000 Connecticut HEFA, (NHP),
(Windsor), 7.125%, 11/1/14 3,453,090
A1 AA- 500 Connecticut HEFA, (NHP),
(Windsor), 7.125%, 11/1/24 573,860
- --------------------------------------------------------------------------------
$ 24,381,946
- --------------------------------------------------------------------------------
Solid Waste -- 10.2%
- --------------------------------------------------------------------------------
A NR $2,500 Bristol Resource Recovery
Facility Operating
Committee (Ogden Martin
Systems), 6.50%, 7/1/14 $ 2,712,625
A2 A 4,250 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 6.45%, 11/15/22 4,517,240
</TABLE>
See notes to financial statements
34
<PAGE>
Connecticut Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Solid Waste (continued)
- --------------------------------------------------------------------------------
Baa1 AA- $ 450 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 8.00%, 11/15/15 $ 483,134
A2 A 1,000 Connecticut Resources
Recovery Authority,
(American REF-FUEL Co.),
(AMT), 8.10%, 11/15/15 1,074,100
NR A- 8,970 Eastern Connecticut
Resource Recovery
Authority, (Wheelabrator
Lisbon), (AMT), 5.50%,
1/1/20 8,741,892
- --------------------------------------------------------------------------------
$ 17,528,991
- --------------------------------------------------------------------------------
Special Tax Revenue -- 7.1%
- --------------------------------------------------------------------------------
Baa1 A $4,965 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/15 $ 5,190,262
A1 AA- 3,180 State of Connecticut,
(STOB), 6.125%, 9/1/12 3,602,717
A1 AA- 2,000 State of Connecticut,
(STOB), 6.50%, 10/1/12 2,346,560
NR NR 1,000 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 1,109,010
- --------------------------------------------------------------------------------
$ 12,248,549
- --------------------------------------------------------------------------------
Student Loans -- 2.6%
- --------------------------------------------------------------------------------
A1 NR $1,250 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT),
6.20%, 11/15/09 $ 1,328,738
A1 NR 410 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT),
7.375%, 11/15/05 429,131
A1 NR 2,565 Connecticut Higher
Education Supplemental
Loan Authority Revenue
Bonds, (AMT),
7.50%, 11/15/10 2,682,400
- --------------------------------------------------------------------------------
$ 4,440,269
- --------------------------------------------------------------------------------
Transportation -- 1.3%
- --------------------------------------------------------------------------------
NR BBB $2,000 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 2,155,780
- --------------------------------------------------------------------------------
$ 2,155,780
- --------------------------------------------------------------------------------
Water and Sewer -- 0.8%
- --------------------------------------------------------------------------------
Aaa AA+ $1,250 State of Connecticut Clean
Water Fund Revenue Bonds,
6.00%, 10/1/12 $ 1,414,538
- --------------------------------------------------------------------------------
$ 1,414,538
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $162,032,152) $ 171,602,558
- --------------------------------------------------------------------------------
</TABLE>
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 the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 18.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 1.8% to 7.6% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
35
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 2.7%
- --------------------------------------------------------------------------
NR BBB $1,000 Guam Power Authority,
6.625%, 10/1/14 $ 1,088,680
Baa1 BBB+ 500 Michigan South Central
Power Agency Supply
System, 6.75%, 11/1/10 541,185
Baa1 BBB 1,780 Monroe County, MI, PCR,
(Detroit Edison Project)
(AMT), 7.75%, 12/1/19 1,934,290
Baa1 BBB+ 365 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 391,817
- -------------------------------------------------------------------------
$ 3,955,972
- -------------------------------------------------------------------------
Escrowed / Prerefunded -- 6.0%
- -------------------------------------------------------------------------
NR NR $2,550 Clintondale, MI, Community
Schools, 6.75%, 5/1/24 $ 2,883,158
Aaa AAA 1,000 Lake Orion, MI, School
District General
Obligations (AMBAC),
7.00%, 5/1/20 1,173,700
Aaa AAA 750 Michigan HFA, (Oakwood
Hospital) (FGIC), 7.20%,
11/1/15 829,073
Aaa AAA 3,500 Monroe County, MI, EDA,
(Mercy Memorial Hospital),
(MBIA), 7.00%, 9/1/21 3,933,685
- -------------------------------------------------------------------------
$ 8,819,616
- -------------------------------------------------------------------------
General Obligations -- 5.3%
- -------------------------------------------------------------------------
Aa2 AA $ 500 Avondale School District,
MI, School Building and
Site, 6.75%, 5/1/14 $ 544,415
Baa2 BBB 5,295 Detroit, MI, 6.35%, 4/1/14 5,637,638
Baa2 BBB 500 Detroit, MI, 6.70%, 4/1/10 551,585
Aa2 AA 1,000 Mattawan, MI, Consolidated
Schools, 6.40%, 5/1/09 1,099,710
- -------------------------------------------------------------------------
$ 7,833,348
- -------------------------------------------------------------------------
Hospitals -- 16.1%
- -------------------------------------------------------------------------
NR BBB $2,000 Michigan HFA, (Central
Michigan Community
Hospital), 6.25%, 10/1/27 $ 2,069,700
A2 A 4,225 Michigan HFA, (Detroit
Medical Center Obligated
Group), 5.50%, 8/15/23 4,230,831
A2 A 4,000 Michigan HFA, (Detroit
Medical Center Obligated
Group), 6.25%, 8/15/13 4,275,680
A2 A 450 Michigan HFA, (Detroit
Medical Center Obligated
Group), 7.50%, 8/15/11 501,372
Aa AA 250 Michigan HFA, (Henry Ford
Continuing Care Corp.),
6.75%, 7/1/11 272,483
A1 NR 9,000 Michigan HFA, (McLaren
Obligated Group), 4.50%,
10/15/21 7,912,349
A2 A 4,130 Michigan HFA, (MidMichigan
Obligated Group),
6.625%, 6/1/10 4,283,925
- -------------------------------------------------------------------------
$ 23,546,340
- -------------------------------------------------------------------------
Housing -- 1.4%
- -------------------------------------------------------------------------
NR A+ $1,020 Michigan HDA Rental
Housing, (AMT), 7.15%,
4/1/10 $ 1,089,166
NR AA+ 1,000 Michigan HDA, SFMR, (AMT),
6.20%, 12/1/27 1,040,380
- -------------------------------------------------------------------------
$ 2,129,546
- -------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 9.8%
- -------------------------------------------------------------------------
Baa1 BBB $3,970 Dickinson, MI, PCR,
(Champion International),
5.85%, 10/1/18 $ 4,115,898
A3 A- 5,970 Michigan Strategic Fund,
(General Motors Corp.),
6.20%, 9/1/20 6,306,409
NR BB- 110 Michigan Strategic Fund,
(KMart, Corp.), 6.80%,
6/15/07 115,137
NR NR 3,000 Michigan Strategic Fund,
(S.D. Warren Co.) (AMT),
7.375%, 1/15/22 3,224,520
NR BB- 530 Richmond, MI, EDC, (Kmart
Corp.), 6.625%, 1/1/07 557,624
- -------------------------------------------------------------------------
$ 14,319,588
- -------------------------------------------------------------------------
Insured-Education -- 7.2%
- -------------------------------------------------------------------------
Aaa AAA $ 500 Eastern Michigan
University, (AMBAC),
6.375%, 6/1/14 $ 545,220
Aaa AAA 2,870 Eastern Michigan
University, (FGIC), 5.50%,
6/1/27 2,920,656
Aaa AAA 3,360 Ferris State University,
MI, (MBIA), 5.25%, 10/1/20 3,302,275
Aaa AAA 1,000 Grand Rapids, MI,
Community College, (MBIA),
5.375%, 5/1/19 1,005,180
</TABLE>
See notes to financial statements
36
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Western Michigan
University, (AMBAC),
6.50%, 7/15/21 $ 546,335
Aaa AAA 2,350 Western Michigan
University, (FGIC), 5.00%,
7/15/21 2,261,076
- --------------------------------------------------------------------------------
$ 10,580,742
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Michigan Strategic Fund,
(Detroit Edison Co.)
(FGIC), 6.95%, 5/1/11 $ 365,985
Aaa AAA 4,000 Michigan Strategic Fund,
(Detroit Edison Co.)
(FGIC), 6.95%, 9/1/21 4,447,400
Aaa AAA 550 Monroe County, MI, PCR,
(Detroit Edison Co.)
(FGIC) (AMT), 7.65%, 9/1/20 608,416
- --------------------------------------------------------------------------------
$ 5,421,801
- --------------------------------------------------------------------------------
Insured-General Obligations -- 11.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Detroit, MI, (FGIC),
5.50%, 4/1/16 $ 510,480
Aaa AAA 4,750 Grand Ledge, MI, School
District, (MBIA), 5.375%,
5/1/24 4,765,675
Aaa AAA 2,000 Holland, MI, School
District, (AMBAC), 0.00%,
5/1/17 711,780
Aaa AAA 3,000 Kalamazoo, MI, Public
Library, (MBIA), 5.40%,
5/1/14 3,180,420
Aaa AAA 1,500 Lincoln Park, MI, School
District, (FGIC), 5.90%,
5/1/26 1,585,755
Aaa AAA 2,000 Livonia, MI, School
District, (FGIC), 5.125%,
5/1/22 1,951,880
Aaa AAA 1,300 Mason, MI, School
District, (FGIC), 5.40%,
5/1/21 1,309,685
Aaa AAA 2,610 Okemos, MI, Public
Schools, (MBIA), 0.00%,
5/1/16 987,755
Aaa AAA 250 Traverse, MI, Public
Schools, (MBIA), 5.70%,
5/1/16 261,500
Aaa AAA 1,500 Ypsilanti, MI, School
District, (FGIC), 5.375%,
5/1/26 1,507,215
- --------------------------------------------------------------------------------
$ 16,772,145
- --------------------------------------------------------------------------------
Insured-Hospitals -- 7.1%
- --------------------------------------------------------------------------------
Aaa AAA $3,500 Jackson, MI, HFA, (W.A.
Foote Memorial) (FGIC),
4.75%, 6/1/15 $ 3,256,505
Aaa AAA 3,500 Kent, MI, HFA,
(Butterworth Health
System), (MBIA),
6.125%, 1/15/21 3,764,320
Aaa AAA 3,200 Michigan HFA, (Linked
Bulls & Bears) (FSA),
6.10%, 8/15/22 3,337,184
- --------------------------------------------------------------------------------
$ 10,358,009
- --------------------------------------------------------------------------------
Insured-Housing -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Michigan HDA, (Parkway
Meadows Project) (FSA),
6.85%, 10/15/18 $ 536,725
Aaa AAA 2,075 Michigan HDA, SFMR,
(AMBAC), (AMT), 6.05%,
12/1/27 2,149,347
- --------------------------------------------------------------------------------
$ 2,686,072
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 8.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Clinton Township, MI,
Water and Sewage System,
(AMBAC), 4.75%, 7/1/09 $ 299,178
Aaa AAA 400 Clinton Township, MI,
Water and Sewage System,
(AMBAC), 4.75%, 7/1/10 395,044
Aaa AAA 400 Clinton Township, MI,
Water and Sewage System,
(AMBAC), 4.75%, 7/1/11 391,612
Aaa AAA 400 Clinton Township, MI,
Water and Sewage System,
(AMBAC), 4.75%, 7/1/12 387,108
Aaa AAA 8,180 Detroit City, MI, Water
Supply System, (FGIC),
4.75%, 7/1/19 7,640,692
Aaa AAA 3,425 Detroit City, MI, Water
Supply System, (FGIC),
6.25%, 7/1/12 3,740,032
- --------------------------------------------------------------------------------
$ 12,853,666
- --------------------------------------------------------------------------------
Life Care -- 1.8%
- --------------------------------------------------------------------------------
NR BBB $1,500 Kalamazoo Michigan
Economic Development,
6.25%, 5/15/27 $ 1,554,315
NR NR 1,000 Michigan HFA,
(Presbyterian Village),
6.50%, 1/1/25 1,044,550
- --------------------------------------------------------------------------------
$ 2,598,865
- --------------------------------------------------------------------------------
Miscellaneous -- 4.7%
- --------------------------------------------------------------------------------
NR A $ 590 Michigan Municipal Bond
Authority Local Government
Loan, 6.90%, 5/1/21 $ 652,481
Aa2 AA 2,550 Michigan Municipal Bond
Authority Local Government
Loan-Qualified School,
6.50%, 5/1/07 2,851,716
</TABLE>
See notes to financial statements
37
<PAGE>
Michigan Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Miscellaneous (continued)
- --------------------------------------------------------------------------------
NR A- $1,770 Michigan Strategic
Environmental Research
Institute,
6.375%, 8/15/12 $ 1,900,785
NR NR 1,500 Pittsfield Township, MI,
EDC, (Arbor Hospice
Project),
7.875%, 8/15/27 1,476,360
- --------------------------------------------------------------------------------
$ 6,881,342
- --------------------------------------------------------------------------------
Pooled Loans -- 2.0%
- --------------------------------------------------------------------------------
NR A $1,825 Michigan Muni Bond
Authority Local Government
Loan, 6.75%, 5/1/12 $ 2,053,892
Aa2 AA 760 Michigan Municipal Parking
Bond Authority, 6.50%,
11/1/08 846,123
- --------------------------------------------------------------------------------
$ 2,900,015
- --------------------------------------------------------------------------------
Solid Waste -- 0.7%
- --------------------------------------------------------------------------------
Ba1 BBB- $1,000 Central Wayne County, MI,
Sanitation Authority,
6.50%, 7/1/07 $ 1,070,070
- --------------------------------------------------------------------------------
$ 1,070,070
- --------------------------------------------------------------------------------
Special Tax Revenue -- 6.8%
- --------------------------------------------------------------------------------
NR BBB+ $ 250 Battle Creek, MI, Downtown
Development Authority Tax
Increment, 7.60%, 5/1/16 $ 292,450
NR BBB+ 1,315 Battle Creek, MI, Downtown
Development Authority Tax
Increment, 7.65%, 5/1/22 1,542,022
NR A 6,550 Detroit, MI, (Convention
Facility Cobo Hall
Expansion Project), 5.25%,
9/30/12/(1)/ 6,492,097
NR A- 3,050 Detroit, MI, Downtown Tax
Increment, 0.00%, 7/1/16 1,047,553
NR A- 2,000 Detroit, MI, Downtown Tax
Increment, 0.00%, 7/1/20 541,900
- --------------------------------------------------------------------------------
$ 9,916,022
- --------------------------------------------------------------------------------
Transportation -- 2.6%
- --------------------------------------------------------------------------------
Baa3 BBB- $3,500 Puerto Rico Port
Authority, (American
Airlines), (AMT), 6.25%,
6/1/26 $ 3,754,660
- --------------------------------------------------------------------------------
$ 3,754,660
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $133,350,836) $146,397,819
- --------------------------------------------------------------------------------
</TABLE>
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 the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 44.1% 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 2.6% to 22.5%.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
38
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 1.6%
- --------------------------------------------------------------------------------
NR NR $1,000 St. Paul, MN, Housing
and Redevelopment,
(Elder Care Institute,
Inc.), 8.75%, 11/1/24 $1,136,410
- --------------------------------------------------------------------------------
$1,136,410
- --------------------------------------------------------------------------------
Education -- 3.2%
- --------------------------------------------------------------------------------
Baa2 NR $ 500 Minnesota Higher
Education Facilities
Authority, (St. Mary's
College), 6.15%, 10/1/23 $ 519,805
A3 NR 100 Minnesota State
Higher Education
Facilities Authority,
(St. Olaf College),
6.25%, 4/1/10 100,213
A3 NR 500 Minnesota State Higher
Education Facilities,
(St. John's University),
5.40%, 10/1/22 501,900
A2 NR 1,100 Minnesota State
Higher Education
Facilities,
(University of St. Thomas),
5.40%, 4/1/22 1,108,976
- -------------------------------------------------------------------------------
$2,230,894
- -------------------------------------------------------------------------------
Electric Utilities -- 4.0%
- -------------------------------------------------------------------------------
Baa1 BBB+ $1,130 Bass Brook, MN,
Pollution Control
Revenue, (Minnesota
Power and Light), 6.00%,
7/1/22 $1,163,651
A2 A 500 Northern Municipal
Power Agency, Minnesota
Electric, 7.25%,
1/1/16 530,380
A2 A+ 1,100 Southern Minnesota
Municipal Power
Agency, 5.00%,
1/1/12 1,081,663
- -------------------------------------------------------------------------------
$2,775,694
- -------------------------------------------------------------------------------
Escrowed / Prerefunded -- 3.3%
- -------------------------------------------------------------------------------
Aaa AAA $ 150 Minnesota Public
Facilities Authority,
Pollution Control,
Prerefunded to 3/1/01,
6.70%, 3/1/13 $ 165,701
Aaa AAA 100 Minnesota Public
Facilities Authority,
Pollution Control,
Prerefunded to 3/1/99,
7.00%, 3/1/09 106,557
Aaa AAA 1,700 State of Minnesota,
Prerefunded to 8/1/02,
Variable Rate, 8/1/11/(1)/ 2,018,750
- -------------------------------------------------------------------------------
$2,291,008
- -------------------------------------------------------------------------------
General Obligations -- 4.1%
- -------------------------------------------------------------------------------
Aaa AAA $ 200 Minneapolis and St. Paul,
MN, Apartments Commission,
(AMT), 6.60%, 1/1/09 $ 217,144
Aaa AAA 300 Minneapolis and St. Paul,
MN, Apartments Commission,
(AMT), 6.60%, 1/1/10 325,092
A1 AA- 200 St. Cloud, MN,
Variable Rate, 8/1/13/(1)/ 222,000
Aaa AAA 1,000 State of Minnesota,
5.40%, 8/1/13 1,023,740
Aaa AAA 1,000 State of Minnesota, (Duluth
Airport), (AMT),
6.25%, 8/1/14 1,088,470
- -------------------------------------------------------------------------------
$2,876,446
- -------------------------------------------------------------------------------
Hospitals -- 14.5%
- -------------------------------------------------------------------------------
A A- $1,250 Minneapolis and St. Paul,
MN, Housing and
Redevelopment Authority,
(Group Health Plan, Inc.),
6.75%, 12/1/13 $1,380,313
A A- 250 Minneapolis and St. Paul,
MN, Housing and
Redevelopment Authority,
(Group Health Plan, Inc.),
6.90%, 10/15/22 276,438
NR BBB+ 2,120 Red Wing, MN, Health Care
Facilities, 6.50%, 9/1/22 2,232,699
NR AA+ 2,200 Rochester, MN, Health Care
Facilities, (AMT), Variable
Rate, 11/15/15/(1)/ 2,491,499
Baa BBB 1,000 St. Paul, MN, Housing
and Redevelopment
Authority, (Healtheast),
6.625%, 11/1/17 1,065,510
Baa BBB 2,500 St. Paul, MN, Housing
and Redevelopment
Authority, (Healtheast),
6.625%, 11/1/17 2,663,774
- -------------------------------------------------------------------------------
$10,110,233
- -------------------------------------------------------------------------------
Housing -- 23.6%
- -------------------------------------------------------------------------------
NR AAA $ 300 Coon Rapids, MN,
Multifamily Housing,
(Browns Meadow), (FHA),
(AMT), 6.85%, 8/1/33 $ 313,560
NR AAA 1,395 Dakota County, MN,
Housing and Redevelopment
Authority, (GNMA),
7.375%, 12/1/29/(2)/ 1,527,999
Aaa NR 500 Eagan, MN,
Multifamily Revenue,
(Woodridge Apartments),
(GNMA), 5.95%, 2/1/32 511,710
Aaa NR 500 Little Canada, MN,
Facilities Revenue,
(Cedars Lakeside) (GNMA),
5.90%, 8/1/20 513,445
</TABLE>
See notes to financial statements
39
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- ------------------------------------------------------------------------------
Aaa NR $ 500 Little Canada, MN,
Facilities Revenue,
(Cedars Lakeside) (GNMA),
5.95%, 2/1/32 $ 511,710
Aa NR 1,200 Maplewood, MN,
Multifamily Housing,
(Beaver Creek), (FHA),
6.50%, 9/1/24 1,264,656
NR AAA 90 Minneapolis and
St. Paul, MN,
Housing Finance
Board, SFM, (GNMA), (AMT),
7.30%, 8/1/31 95,297
Aa2 AA+ 400 Minnesota State
Housing Finance Agency,
SFM, 6.95%, 7/1/16 425,660
Aa2 AA+ 4,035 Minnesota State
Housing Finance Agency,
SFM, (AMT),
6.50%, 1/1/26 4,217,865
Aa2 AA+ 1,000 Minnesota State
Housing Finance Agency,
SFM, (AMT),
6.75%, 7/1/12 1,056,930
Aa2 AA+ 660 Minnesota State
Housing Finance Agency,
SFM, (AMT),
6.75%, 1/1/26 695,290
Aa2 AA+ 1,235 Minnesota State
Housing Finance Agency,
SFM, (AMT),
6.85%, 1/1/24 1,305,062
Aa2 AA+ 380 Minnesota State
Housing Finance Agency,
SFM, (AMT),
7.05%, 7/1/22 398,552
Aa NR 1,250 St. Louis Park, MN,
Multifamily Revenue,
(Knollwood Apartments),
(FHA), 6.25%, 12/1/28 1,296,088
Aaa NR 1,685 St. Paul, MN,
Housing and Redevelopment
Authority, Multifamily
Housing, (Cliffe
Apartments), (GNMA),
6.00%, 1/1/31 1,732,197
NR AAA 330 St. Paul, MN,
Housing and Redevelopment
Authority, SFM, (FNMA),
6.90%, 12/1/21 348,114
NR AAA 210 St. Paul, MN,
Housing and Redevelopment
Authority, SFM, (FNMA),
6.95%, 12/1/31 221,195
- ------------------------------------------------------------------------------
$16,435,330
- ------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 7.6%
- ------------------------------------------------------------------------------
NR A- $1,000 Cloquet, MN,
Pollution Control
Revenue, (Potlach Corp.),
5.90%, 10/1/26 $1,035,830
- ------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue (continued)
- ------------------------------------------------------------------------------
NR A- $ 750 Minneapolis, MN,
Community
Development Agency,
6.00%, 6/1/11 $ 772,193
NR A- 100 Minneapolis, MN,
Community Development
Agency, 7.35%, 12/1/09 106,581
NR A- 1,250 Minneapolis, MN,
Community Development
Agency, 7.40%, 12/1/21 1,330,675
NR A- 1,605 Minneapolis, MN,
Community Development
Agency, (AMT),
6.80%, 12/1/24 1,730,591
NR A- 300 Minneapolis, MN,
Community Development
Agency, (FICN),
6.40%, 12/1/04 312,849
- ------------------------------------------------------------------------------
$5,288,719
- ------------------------------------------------------------------------------
Insured-Electric Utilities -- 14.8%
- ------------------------------------------------------------------------------
Aaa AAA $ 300 Northern Municipal
Power Agency,
(Minnesota
Electric) (AMBAC),
6.00%, 1/1/19 $307,215
Aaa AAA 300 Southern Minnesota
Municipal Power
Agency, Variable
Rate, (AMT),
1/1/18/(1)/ 317,250
Aaa AAA 6,950 Southern Minnesota
Municipal Power
Agency, (MBIA),
0.00%, 10/1/21 2,009,454
Aaa AAA 10,000 Southern Minnesota
Municipal Power
Agency, (MBIA),
0.00%, 1/1/25 2,329,000
Aaa AAA 9,880 Southern Minnesota
Municipal Power
Agency, (MBIA),
0.00%, 1/1/26 2,179,528
Aaa AAA 4,800 Southern Minnesota
Municipal Power
Agency, (MBIA),
0.00%, 1/1/27 1,004,064
Aaa AAA 1,250 Southern Minnesota
Municipal Power
Agency, (MBIA),
4.75%, 1/1/16 1,185,225
Aaa AAA 450 Southern Minnesota
Municipal Power
Agency, (MBIA),
5.00%, 1/1/12 449,523
Aaa AAA 510 Western Minnesota
Municipal Power
Agency, (MBIA),
5.50%, 1/1/15 510,117
- ------------------------------------------------------------------------------
$10,291,376
- ------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
40
<PAGE>
Minnesota Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations -- 2.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,330 St. Francis, MN,
Independent School
District No. 15,
(FGIC), 6.35%, 2/1/12 $ 1,497,008
- --------------------------------------------------------------------------------
$ 1,497,008
- --------------------------------------------------------------------------------
Insured-Hospitals -- 10.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 100 Minneapolis and
St. Paul, MN,
Health Care Systems,
(Health One), (MBIA),
7.40%, 8/15/11 $ 110,468
Aaa AAA 4,330 Minneapolis and
St. Paul, MN,
Housing and Redevelopment,
(Healthspan), (AMBAC),
4.75%, 11/15/18 4,048,852
Aaa AAA 250 Minneapolis, MN,
Hospital Revenue,
(Fairview Hospital), (MBIA),
6.50%, 1/1/11 273,815
Aaa AAA 450 Minnesota
Agricultural and
Economic Development,
(Fairview Hospital), (MBIA),
5.75%, 11/15/26 472,644
Aaa AAA 450 Plymouth, MN,
Health Facilities,
(Westhealth), (CGIC),
6.25%, 6/1/16 488,336
Aaa AAA 1,000 St. Louis Park,
MN, Health Care Facilities,
(AMBAC), Variable Rate,
7/1/13 /(1)/ 983,750
Aaa AAA 750 St. Louis Park,
MN, Health Care
Facilities, Health
System Minnesota
Obligated Group, (AMBAC),
5.20%, 7/1/23 733,260
- --------------------------------------------------------------------------------
$ 7,111,125
- --------------------------------------------------------------------------------
Insured-Housing -- 2.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,500 SCA MFMR Receipts,
Burnsville, MN,
(FSA), 7.10%, 1/1/30 $ 1,643,895
- --------------------------------------------------------------------------------
$ 1,643,895
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 4.5%
- --------------------------------------------------------------------------------
Aaa AAA $3,000 St. Paul, MN,
Housing and Redevelopment
Authority, (Civic Center),
(MBIA), 5.45%, 11/1/13 $ 3,114,119
- --------------------------------------------------------------------------------
$ 3,114,119
- --------------------------------------------------------------------------------
Lease Revenue / Certificates
of Participation -- 3.3%
- --------------------------------------------------------------------------------
Baa1 NR $ 350 Cambridge, MN,
Economic Development
Authority, 6.25%, 2/1/14 $ 363,584
Aa2 AA 1,770 Hennepin County, MN,
6.80%, 5/1/17 /(2)/ 1,941,478
- --------------------------------------------------------------------------------
$ 2,305,062
- --------------------------------------------------------------------------------
Solid Waste -- 0.7%
- --------------------------------------------------------------------------------
Aa3 A1+ $ 450 Anoka County, MN,
Solid Waste Disposal,
National Rural Utility,
(AMT), 6.95%, 12/1/08 $ 487,130
- --------------------------------------------------------------------------------
$ 487,130
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $63,057,066) $69,594,449
- --------------------------------------------------------------------------------
</TABLE>
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 Minnesota
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 37.2% 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 by financial
institution ranged from .07% to 19.6% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
41
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 2.7%
- --------------------------------------------------------------------------------
A2 A $ 1,455 New Jersey EDA, 7.05%, 3/1/16 $ 1,505,605
NR NR 3,750 New Jersey EDA, (Chelsea at East
Brunswick Project), (AMT),
8.25%, 10/1/20 3,888,638
NR NR 3,630 New Jersey EDA, (Forsgate
Project), (AMT),
8.625%, 6/1/25 4,006,830
- --------------------------------------------------------------------------------
$ 9,401,073
- --------------------------------------------------------------------------------
Cogeneration -- 4.0%
- --------------------------------------------------------------------------------
NR BB+ $12,750 New Jersey EDA, (Vineland
Cogeneration), (AMT),
7.875%, 6/1/19 $13,955,512
- --------------------------------------------------------------------------------
$13,955,512
Education -- 2.5%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 2,480 New Jersey Education Facilities
Authority, 7.00%, 7/1/21 $ 2,653,054
NR NR 8,800 New Jersey Higher Educational
Student Loan Bonds, (AMT),
0.00%, 7/1/10 3,273,248
A1 AA 2,500 Rutgers, The State University of
New Jersey, 6.85%, 5/1/21 2,758,275
- --------------------------------------------------------------------------------
$ 8,684,577
- --------------------------------------------------------------------------------
Electric Utilities -- 3.2%
- --------------------------------------------------------------------------------
NR BBB $ 100 Guam Power Authority, $ 98,600
5.25%, 10/1/13
NR BBB 750 Guam Power Authority,
5.25%, 10/1/23 726,113
NR BBB 3,000 Guam Power Authority, 3,269,340
6.75%, 10/1/24
Baa1 BBB+ 5,000 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 1,767,450
NR NR 4,905 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 5,324,672
- --------------------------------------------------------------------------------
$11,186,175
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.9%
- --------------------------------------------------------------------------------
Aaa A+ $ 1,000 New Jersey EDA, Performing Arts
Center, Prerefunded to 6/15/01,
6.75%, 6/15/12 $ 1,111,590
Aaa AAA $ 1,155 New Jersey Educational Facilities
Authority, (Seton Hall University),
Prerefunded to 7/1/99,
6.85%, 7/1/19 1,238,183
Aa2 AAA 1,205 New Jersey Health Care Facilities
Financing Authority, (Barnett
Hospital), Prerefunded to 8/1/01,
6.80%, 8/1/19 1,332,031
Aaa AA 1,040 New Jersey Wastewater Treatment
Trust, Prerefunded to 5/15/98,
7.25%, 5/15/08 1,088,599
NR AA 920 New Jersey Wastewater Treatment
Trust, Prerefunded to 6/15/00,
6.875%, 6/15/09 1,006,278
NR AA 230 New Jersey Wastewater Treatment
Trust, Prerefunded to 6/15/00,
7.00%, 6/15/10 252,342
Aaa AAA 870 Newark, NJ, (AMBAC), Prerefunded
to 10/1/99, 7.375%, 10/1/07 947,500
NR NR 2,000 Passaic County, NJ, Prerefunded
to 9/1/99, 6.70%, 9/1/13 2,142,620
A3 AA- 1,000 University of Medicine and
Dentistry, Prerefunded to
12/1/99, 7.20%, 12/1/19 1,089,830
- --------------------------------------------------------------------------------
$10,208,973
- --------------------------------------------------------------------------------
General Obligations -- 10.6%
- --------------------------------------------------------------------------------
NR BBB $ 9,745 Government of Guam,
5.40%, 11/15/18 $ 9,634,784
Aa2 NR 3,000 Mercer County Improvement
Authority, 0.00%, 4/1/10 1,622,850
A1 AA- 19,000 Port Authority of New York and
New Jersey, 6.125%, 6/1/2094 21,828,339
Baa1 A 2,000 Puerto Rico Public Buildings
Authority, Public Education and
Health Facilities, 5.50%, 7/1/21 2,013,920
NR BBB 400 Puerto Rico, (Guaynabo Municipal
Government Center Lease),
5.625%, 7/1/22 401,760
NR A+ 1,500 The Hudson County Improvement
Authority, 6.625%, 8/1/25 1,625,940
- --------------------------------------------------------------------------------
$37,127,593
- --------------------------------------------------------------------------------
Hospitals -- 8.5%
- --------------------------------------------------------------------------------
A3 A- $ 2,300 New Jersey Health Care Facilities
Financing Authority, (Atlantic
City Medical Center), 6.80%,
7/1/11 $ 2,509,185
</TABLE>
See notes to financial statements
42
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Hospitals (continued)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A2 A $3,750 New Jersey Health Care Facilities
Financing Authority, (Chilton
Memorial Hospital), 5.00%, 7/1/13
Baa2 NR 5,875 New Jersey Health Care Facilities $ 3,675,263
Financing Authority, (Deborah
Heart and Lung Center),
6.30%, 7/1/23 6,146,190
Baa NR 4,000 New Jersey Health Care Facilities
Financing Authority, (Southern
Ocean County Hospital),
6.25%, 7/1/23 4,168,360
Aa2 AAA 9,585 New Jersey Health Care Facilities
Financing Authority,
(St. Elizabeth's Hospital),
6.80%, 8/1/19 10,316,431
NR BBB+ 2,720 New Jersey Health Care Facilities,
(Holy Name Hospital),
6.00%, 7/1/25 2,796,133
- --------------------------------------------------------------------------------
$ 29,611,562
- --------------------------------------------------------------------------------
Housing -- 3.4%
- --------------------------------------------------------------------------------
NR AAA $2,000 New Jersey Housing and Mortgage
Finance Agency, (Presidential
Plaza), (FHA), 6.95%, 5/1/13 $ 2,173,940
NR AAA 3,700 New Jersey Housing and Mortgage
Finance Agency, (Presidential
Plaza), (FHA), 7.00%, 5/1/30 4,019,014
NR A+ 1,000 New Jersey Housing and Mortgage
Finance Agency, Rental Housing,
(AMT), 7.10%, 5/1/22 1,059,860
NR AA+ 1,975 New Jersey Housing and Mortgage
Finance Agency, Section 8,
7.10%, 11/1/11 2,108,925
NR AA+ 1,000 New Jersey Housing and Mortgage
Finance Agency, Section 8,
7.10%, 11/1/12 1,067,810
NR A+ 1,250 New Jersey Housing Finance
Agency, (AMT), 7.25%, 11/1/22 1,321,638
Aaa AAA 190 Puerto Rico Housing Finance Corp.,
Single Family Mortgage Revenue,
(GNMA), 6.85%, 10/15/23 201,026
- --------------------------------------------------------------------------------
$ 11,952,213
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 7.3%
- --------------------------------------------------------------------------------
NR NR $4,000 Middlesex County Pollution Control
Financing Authority, (Amerada
Hess Corp.), 6.875%, 12/1/22 $ 4,367,080
NR NR $2,000 Middlesex County Pollution Control
Financing Authority, (Amerada
Hess Corp.), 7.875%, 6/1/22 $ 2,307,440
NR NR 5,640 New Jersey EDA, (777 Pattison
Ave., Inc.), (AMT),
8.95%, 12/15/18 6,232,538
Aa1 NR 3,000 New Jersey EDA, (Garden State
Paper Co.), 7.125%, 4/1/22 3,293,580
NR NR 1,160 New Jersey EDA, (National
Association of Accountants),
7.65%, 7/1/09 1,243,160
NR NR 2,000 New Jersey EDA, (The Seeing Eye,
Inc.), 7.30%, 4/1/11 2,130,160
NR BBB- 1,725 New Jersey EDA, (Trigen Trenton),
(AMT), 6.20%, 12/1/07 1,806,817
Baa1 BBB+ 2,135 New Jersey EDA, GATX Terminals
Corp., 7.30%, 9/1/19 2,431,594
NR NR 1,500 New Jersey EDA, Holt Hauling and
Warehousing System, Inc.,
7.90%, 3/1/27 1,620,075
- --------------------------------------------------------------------------------
$ 25,432,444
- --------------------------------------------------------------------------------
Insured-Education -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 845 New Jersey Educational Facilities
Authority, (Seton Hall University),
(BIGI), 6.85%, 7/1/19 $ 905,612
- --------------------------------------------------------------------------------
$ 905,612
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 0.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,150 New Jersey EDA, New Jersey
American Water Co., (AMT)
(FGIC), 6.875%, 11/1/34 $ 1,298,753
- --------------------------------------------------------------------------------
$ 1,298,753
- --------------------------------------------------------------------------------
Insured-Hospitals -- 2.9%
- --------------------------------------------------------------------------------
Aaa NR $3,800 New Jersey EDA, (Hillcrest Health
Services), (AMBAC),
0.00%, 1/1/18 $ 1,332,280
Aaa NR 4,250 New Jersey EDA, (Hillcrest Health
Services), (AMBAC), 1,415,505
0.00%, 1/1/19
Aaa NR 1,235 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/18 422,024
Aaa NR 1,575 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/22 429,975
</TABLE>
See notes to financial statements
43
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Hospitals (continued)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa NR $ 1,000 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/23 $ 258,750
Aaa NR 10,620 New Jersey EDA, (St. Barnabus
Project), (MBIA), 0.00%, 7/1/26 2,339,905
Aaa AAA 1,570 New Jersey Health Care Facilities
Financing Authority, (Cathedral
Health Services) (MBIA),
7.25%, 2/15/21 1,741,491
Aaa AAA 2,000 New Jersey Health Care Facilities
Financing Authority, (Hackensack
Medical Center) (FGIC),
6.25%, 7/1/21 2,117,680
- --------------------------------------------------------------------------------
$ 10,057,610
- --------------------------------------------------------------------------------
Insured-Housing -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,200 New Jersey Housing and Mortgage
Finance Agency, (AMT) (MBIA),
7.70%, 10/1/29 $ 1,260,336
Aaa AAA 1,410 New Jersey Housing and Mortgage
Finance Agency, (MBIA),
7.375%, 10/1/17 1,482,897
Aaa AAA 1,620 Pennsauken Township, Housing
Finance Corp., (MBIA),
8.00%, 4/1/11 1,690,778
- --------------------------------------------------------------------------------
$ 4,434,011
- --------------------------------------------------------------------------------
Insured-Lease Revenue/Certificates of
Participation -- 3.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,900 County of Atlantic, NJ, Public
Facilities Lease Agreement, (FGIC),
6.00%, 3/1/13 $ 4,404,621
Aaa AAA 1,750 Hudson County, NJ, Correctional
Facility, (MBIA),
6.50%, 12/1/11 1,920,748
Aaa AAA 2,500 Hudson County, NJ, Improvement
Authority, Secondary Yield Curve
Notes, (FGIC) Variable
Rate, 12/1/25/(1)/ 2,828,125
Aaa AAA 1,800 Middlesex County, NJ, Certificates
of Participation, (MBIA),
6.125%, 2/15/19 1,938,312
Aaa AAA 2,125 University of Medicine and
Dentistry, Certificates of
Participation, (MBIA),
6.75%, 12/1/09 2,285,629
- --------------------------------------------------------------------------------
$ 13,377,435
- --------------------------------------------------------------------------------
Insured-Transportation -- 5.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,250 Delaware River and Bay
Authority, (MBIA), 4.75%, 1/1/24 $ 3,036,670
NR AAA 5,000 New Jersey Turnpike Authority,
"RITES" (MBIA), Variable
Rate, 1/1/16/(1)/ 6,681,250
Aaa AAA 5,450 New Jersey Turnpike Authority,
(MBIA), 6.50%, 1/1/16 6,440,810
Aaa AAA 1,000 New Jersey Turnpike Authority,
(MBIA), 6.50%, 1/1/16 1,181,800
- --------------------------------------------------------------------------------
$ 17,340,530
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 0.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,500 Middlesex County Utilities
Authority, (MBIA), Variable
Rate, 8/15/10/(1)/ $ 2,848,425
- --------------------------------------------------------------------------------
$ 2,848,425
- --------------------------------------------------------------------------------
Lease Revenue/Certificates
of Participation -- 4.1%
- --------------------------------------------------------------------------------
Baa1 A- $ 720 County of Atlantic, NJ, Public
Facilities Lease Agreement,
8.875%, 1/15/14 $ 987,113
Baa1 A- 785 County of Atlantic, NJ, Public
Facilities Lease Agreement,
8.875%, 1/15/15 1,079,281
Aa AA- 2,000 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/15 2,000,760
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/16 1,500,585
Aa AA- 1,500 Mercer County Improvement
Authority, (Richard J. Hughes
Justice), 6.05%, 1/1/17 1,500,570
Aa AA- 2,591 New Jersey Building Authority,
(Garden State Savings Bonds),
0.00%, 6/15/10 1,370,380
Aa AA- 1,250 New Jersey Building Authority,
State Building Revenue,
7.20%, 6/15/13 1,302,175
A1 A+ 5,500 New Jersey EDA, Economic
Recovery Fund, 0.00%, 3/15/13 2,444,035
A1 A+ 1,650 New Jersey EDA, State Contract,
0.00%, 9/15/09 905,685
A1 NR 1,000 Township of Bedminster, NJ,
Board of Education, 7.125%, 9/1/10 1,107,900
- --------------------------------------------------------------------------------
$ 14,198,484
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
44
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Life Care -- 5.3%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa2 NR $ 5,250 Camden County, NJ, Improvement
Authority Revenue,
6.00%, 2/15/27 $ 5,331,113
NR NR 615 New Jersey EDA, (Cadbury Corp.),
7.50%, 7/1/21 632,564
NR NR 2,000 New Jersey EDA, (Cadbury Corp.),
8.00%, 7/1/15 2,138,960
NR NR 300 New Jersey EDA, (Cadbury Corp.),
8.70%, 7/1/07 326,199
NR NR 4,000 New Jersey EDA, (Keswick Pines
Project), 8.75%, 1/1/24 4,374,880
Baa2 BBB 5,400 New Jersey Health Care Facilities,
6.00%, 7/1/27 5,555,358
- --------------------------------------------------------------------------------
$ 18,359,074
- --------------------------------------------------------------------------------
Nursing Homes -- 1.2%
- --------------------------------------------------------------------------------
NR NR $ 1,400 New Jersey EDA, (Claremont
Health System, Inc.),
9.10%, 9/1/22 $ 1,558,508
NR NR 2,500 New Jersey EDA, (Victoria Health
Corp.), 7.65%, 1/1/14 2,679,725
- --------------------------------------------------------------------------------
$ 4,238,233
- --------------------------------------------------------------------------------
Solid Waste -- 3.5%
- --------------------------------------------------------------------------------
NR BB $11,930 Union County, NJ, Utilities
Authority, (AMT),
7.20%, 6/15/14 $ 12,312,475
- --------------------------------------------------------------------------------
$ 12,312,475
- --------------------------------------------------------------------------------
Special Tax Revenue -- 13.4%
- --------------------------------------------------------------------------------
Baa1 A $ 125 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.00%, 7/1/22 $ 119,343
NR NR 7,600 New Jersey Sports and Exposition
Authority, (Monmouth Park
Project), 8.00%, 1/1/25/2/ 8,549,924
NR NR 5,000 Port Authority of New York
and New Jersey, (KIAC),
6.75%, 10/1/19 5,428,800
Baa1 BBB+ 550 Puerto Rico Finance Authority,
7.90%, 7/1/07 581,499
Baa1 A 4,800 Puerto Rico Highway and
Transportation Authority, 4,593,984
5.00%, 7/1/36
Baa1 A 12,325 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/36 12,601,695
NR NR $ 13,350 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 $ 14,805,283
- --------------------------------------------------------------------------------
$ 46,680,528
- --------------------------------------------------------------------------------
Transportation -- 10.8%
- --------------------------------------------------------------------------------
NR BBB $ 1,400 Guam Airport Authority,
6.50%, 10/1/23 $ 1,493,828
NR BBB 1,700 Guam Airport Authority, (AMT),
6.60%, 10/1/10 1,832,906
NR BBB 2,000 Guam Airport Authority, (AMT),
6.70%, 10/1/23 2,155,780
Aaa AAA 5,155 Port Authority of New York
and New Jersey, (AMT),
5.75%, 12/1/22 5,395,996
A1 AA- 4,750 Port Authority of New York
and New Jersey, (AMT),
6.25%, 1/15/27 5,003,080
Baa3 BB+ 5,100 Port Authority of New York and
New Jersey, (Delta Airlines),
6.95%, 6/1/08 5,576,850
Baa3 BBB- 3,050 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 3,271,918
Baa3 BBB- 5,950 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 6,305,394
NR BBB 1,520 South Jersey Transportation
Authority, 6.15%, 1/1/22 1,586,074
A1 AA- 5,000 The Port Authority of New York and
New Jersey, 5.375%, 3/1/28 5,251,550
- --------------------------------------------------------------------------------
$ 37,873,376
- --------------------------------------------------------------------------------
Water and Sewer -- 2.1%
- --------------------------------------------------------------------------------
A1 AA- $ 2,000 Gloucester County Utilities
Authority, 6.50%, 1/1/21 $ 2,170,580
A3 A 4,500 New Jersey EDA, Elizabethtown
Water Revenue, (AMT),
6.70%, 8/1/21 4,827,780
Aa2 AA 80 New Jersey Wastewater Treatment
Trust, 6.875%, 6/15/09 87,743
Aa2 AA 20 New Jersey Wastewater Treatment
Trust, 7.00%, 6/15/10 21,974
Aa3 AA 360 New Jersey Wastewater Treatment
Trust, 7.25%, 5/15/08 376,668
- --------------------------------------------------------------------------------
$ 7,484,745
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
45
<PAGE>
New Jersey Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C>
Total Tax-Exempt Investments -- 100%
(identified cost $316,103,220) $ 348,969,413
- --------------------------------------------------------------------------------
</TABLE>
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 New Jersey
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 18.0% 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 0.3% to 11.5% of total investments.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
46
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 3.5%
- ------------------------------------------------------------------------------------
NR NR $ 2,680 Chester, PA, IDA, (Senior Life
Choice of Paoli, L.P.),
8.05%, 1/1/24 $ 2,869,824
NR NR 5,000 Chester, PA, IDA, (Senior Life
Choice of Kimberton) (AMT),
8.50%, 9/1/25 5,476,950
NR NR 5,000 Delaware, PA, IDA, (Senior
Quarters Project) (AMT),
8.625%, 9/1/25 5,528,100
- ------------------------------------------------------------------------------------
$ 13,874,874
- ------------------------------------------------------------------------------------
Cogeneration -- 3.1%
- ------------------------------------------------------------------------------------
NR NR $12,000 Pennsylvania Economic
Development Authority, EDA,
(Northampton Generation
Project) (AMT), 6.50%,
1/1/13 $ 12,307,559
- ------------------------------------------------------------------------------------
$ 12,307,559
- ------------------------------------------------------------------------------------
Education -- 2.5%
- ------------------------------------------------------------------------------------
NR AAA $ 2,000 Lehigh, PA, (Allentown
College of St. Francis),
6.75%, 12/15/12 $ 2,181,100
NR BBB- 1,100 Lehigh, PA, (Cedar Crest
College), 6.70%, 4/1/26 1,161,677
NR BBB+ 2,000 Pennsylvania Higher
Educational Facilities
Authority, HEFA, 5.90%,
1/1/27 2,051,700
NR A- 4,225 Scranton-Lackawanna, PA,
(University of Scranton),
6.40%, 3/1/07 4,535,369
- ------------------------------------------------------------------------------------
$ 9,929,846
- ------------------------------------------------------------------------------------
Electric Utilities -- 2.6%
- ------------------------------------------------------------------------------------
Baa3 BB- $ 500 Beaver, PA, IDA, (Ohio
Edison Co.), 7.75%, 9/1/24 $ 530,430
Baa1 BBB+ 3,250 Delaware, PA, IDA,
(Philadelphia Electric Co.),
7.375%, 4/1/21 3,558,783
Baa2 BBB+ 4,070 Montgomery, PA, IDA,
(Philadelphia Electric Co.)
(AMT), 7.60%, 4/1/21 4,449,283
NR NR 1,445 Virgin Islands Water and Power
Authority, 7.40%, 7/1/11 1,568,634
- ------------------------------------------------------------------------------------
$ 10,107,130
- ------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 6.2%
- ------------------------------------------------------------------------------------
Aaa AAA $ 5,600 Berks, PA, General
Obligations, (FGIC), Variable
Rate, 11/10/20/(1)/ $ 6,839,000
Aaa NR 1,750 Chester, PA, HEFA,
(Bryn Mar Hospitals),
6.75%, 7/1/14 1,973,580
Aaa AAA 1,405 Lycoming, PA, General
Obligation, (FGIC),
6.40%, 8/15/11 1,523,863
NR A- 1,000 Pennsylvania HEFA, (Elizabeth
College), 7.25%, 6/15/11 1,126,640
NR NR 6,900 Pennsylvania IDA, Economic
Development, 7.00%, 1/1/11 7,706,679
Aaa AAA 4,845 Westmoreland, PA, Municipal
Authority, (FGIC),
0.00%, 8/15/19 1,529,712
Aaa AAA 5,400 Westmoreland, PA, Municipal
Authority, (FGIC),
0.00%, 8/15/20 1,580,418
Aaa AAA 5,880 Westmoreland, PA, Municipal
Authority, (FGIC),
0.00%, 8/15/20 1,742,244
Aaa AAA 500 York, PA, Hospital Authority,
(AMBAC), 7.00%, 7/1/21 554,560
- ------------------------------------------------------------------------------------
$ 24,576,696
- ------------------------------------------------------------------------------------
General Obligations -- 3.7%
- ------------------------------------------------------------------------------------
NR A $ 2,000 Chester Upland, PA, School
District, 6.375%, 9/1/21 $ 2,106,420
NR A 3,000 Dauphin, PA, 6.90%, 6/1/26 3,203,550
A1 A+ 2,050 Lower Providence Township, PA,
Sewer Authority, 6.75%, 5/1/22 2,268,633
NR A 1,950 McKeesport Area, PA, School
District, 5.00%, 4/1/13 1,920,731
Aaa NR 4,065 Montgomery, PA, 5.45%, 9/15/22 4,134,755
A1 AAA 465 Pennsylvania, 6.75%, 1/1/07 510,356
A1 AAA 500 Pennsylvania, 6.75%, 1/1/08 548,770
- ------------------------------------------------------------------------------------
$ 14,693,215
- ------------------------------------------------------------------------------------
Hospitals -- 17.4%
- ------------------------------------------------------------------------------------
A3 NR $ 5,330 Allegheny County, PA,
Hospital Development
Authority, HDA,
5.75%, 5/15/27 $ 5,402,381
NR AAA 2,360 Allegheny, PA, IDA,
(Presbyterian Medical
Center), 6.75%, 2/1/26 2,560,836
</TABLE>
See notes to financial statements
47
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------------
Hospitals (continued)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa BBB $ 2,000 Dauphin, PA, (Community
General Osteopathic
Hospital), 7.375%, 6/1/16 $ 2,179,360
NR NR 4,475 Hazelton Luzerne, PA (Saint
Joseph Medical Center),
8.375%, 7/1/12 5,382,709
NR BBB 1,150 Horizon Hospital Systems
Authority, PA, 6.35%, 5/15/26 1,191,860
A NR 2,670 Indiana, PA, (Indiana
Hospital), 7.125%, 7/1/23 2,934,250
A3 A 3,250 Lehigh, PA, (Muhlenberg
Hospital), 6.60%, 7/15/22 3,490,923
NR BBB- 3,500 McKean, PA, (Bradford
Hospital), 6.00%, 10/1/13 3,556,350
A3 BBB+ 2,550 Monroeville, PA, (Forbes
Health System), 6.25%, 10/1/15 2,673,905
Baa2 NR 1,375 Montgomery, PA, (Montgomery
Hospital Medical Center),
6.60%, 7/1/10 1,466,410
NR BBB+ 2,615 Montgomery, PA, (Pottstown
Medical Center), 6.875%, 11/15/20 2,774,332
A BBB+ 8,500 Pennsylvania Hospital and
Higher Education, (Albert Einstein
Medical Center), 7.625%, 4/1/11 9,047,825
A2 A+ 500 Pennsylvania Hospital and
Higher Education, (Allegheny
General Hospital), 7.25%, 9/1/17 551,970
Ba BBB+ 7,115 Pennsylvania Hospital and
Higher Education, (Graduate Health
System), 7.25%, 7/1/18 7,715,079
Ba BBB+ 5,625 Philadelphia, PA, (Graduate Health
System), 6.625%, 7/1/21 5,852,363
Baa2 NR 4,115 Somerset, PA, (Community
Hospital Project), 6.75%, 3/1/11 4,291,904
A3 A 7,000 Washington, PA, (Monongahela
Valley Hospital), 6.75%, 12/1/08 7,574,840
- ------------------------------------------------------------------------------------
$ 68,647,297
- ------------------------------------------------------------------------------------
Housing -- 7.2%
- ------------------------------------------------------------------------------------
Aaa NR $ 2,015 Allegheny, PA, SFMR, (GNMA),
7.15%, 6/1/17 $ 2,112,284
NR AAA 2,900 Allegheny, PA, SFMR, (Ladies
Grand Army) (FHA),
8.275%, 10/1/36 3,083,686
Aa2 AA+ 2,000 Pennsylvania HFA, SFMR, (AMT),
6.15%, 10/1/27 2,074,020
Aa AA+ 8,350 Pennsylvania HFA, SFMR, (AMT),
7.50%, 10/1/25 9,122,960
Aa2 AA 1,000 Pennsylvania, HFA, (AMT),
Variable Rate, 10/3/23/(1)/ 1,167,500
Aa2 AA+ 1,590 Pennsylvania Housing and
Finance Authority, HFA,
SFMR, (AMT), 5.80%, 10/1/29 1,609,239
Aaa NR 3,000 Philadelphia, PA, Multifamily,
6.95%, 5/15/24 3,180,630
A1 AAA 1,000 Urban Redevelopment Authority of
Pittsburgh Mortgage, 7.125%, 4/1/15 1,055,570
Aa2 AAA 265 Urban Redevelopment Authority of
Pittsburgh Mortgage, 7.45%, 4/1/10 280,725
Aa2 AAA 3,435 Urban Redevelopment Authority of
Pittsburgh Mortgage, (AMT),
7.10%, 4/1/24 3,653,672
A1 NR 1,055 Urban Redevelopment Authority of
Pittsburgh Mortgage, (AMT),
7.40%, 4/1/24 1,116,253
- ------------------------------------------------------------------------------------
$ 28,456,539
- ------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 15.1%
- -------------------------------------------------------------------------------------
A3 A- $ 6,450 Butler, PA, (Witco Corp.),
5.85%, 12/1/23 $ 6,628,214
NR BB- 1,005 Clearfield, PA, (Kmart Corp.),
6.80%, 5/15/07 1,062,958
NR A 4,000 Franklin, PA, (Corning Inc.),
6.25%, 8/1/05 4,476,760
A2 A 12,000 New Morgan, PA, (New Morgan
Landfill) (AMT), 6.50%, 4/1/19 12,915,479
NR BBB- 9,000 Pennsylvania EDA, (Colver) (AMT),
7.125%, 12/1/15 9,894,150
NR BBB- 5,000 Pennsylvania EDA, (Colver) (AMT),
7.15%, 12/1/18 5,504,150
Baa2 BBB- 5,000 Pennsylvania, IDA, (MacMillan
Bloedel Project) (AMT),
7.60%, 12/1/20 5,812,350
Baa3 BBB 4,450 Pennsylvania, IDA, (Sun Company
Project), (AMT), 7.60%, 12/1/24 5,154,346
NR NR 6,500 Philadelphia, PA, (Refrigerated
Enterprises) (AMT), 9.05%, 12/1/19 7,207,915
NR BB- 1,105 Shamokin, PA, (Kmart Corp.),
6.70%, 7/1/07 1,161,245
- -------------------------------------------------------------------------------------
$ 59,817,567
- -------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
48
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 4.2%
- -------------------------------------------------------------------------------------
Aaa AAA $ 2,000 Alleghany, PA, (Duquesne
University Project), (AMBAC),
5.00%, 3/1/21 $ 1,945,920
Aaa AAA 5,000 Cumberland, PA, (Messiah College
Project), (AMBAC), 5.125%, 10/1/15 4,985,600
Aaa AAA 250 Pennsylvania HEFA, (AMBAC),
5.625%, 6/15/19 256,938
Aaa AAA 2,000 Pennsylvania HEFA, (MBIA),
5.75%, 5/1/22 2,101,020
Aaa AAA 2,500 Pennsylvania Higher Education
Student Loan, (AMBAC), (AMT),
7.15%, 9/1/21 2,674,050
Aaa AAA 1,500 Pennsylvania Higher Education
Student Loan, (AMBAC), (AMT),
Variable Rate, 3/1/22/(1)/ 1,657,500
Aaa AAA 700 Pennsylvania Higher Education
Student Loan, (AMBAC), (AMT),
Variable Rate, 9/1/26/(1)/ 813,750
Aaa AAA 2,000 University of Pittsburg,
(FGIC), 5.125%, 6/1/22 1,962,660
- ------------------------------------------------------------------------------------
$ 16,397,438
- ------------------------------------------------------------------------------------
Insured-Electric Utilities -- 5.2%
- ------------------------------------------------------------------------------------
Aaa AAA $ 4,000 Beaver, PA, IDA, (Ohio Edison Co.)
(FGIC), 7.00%, 6/1/21 $ 4,432,080
Aaa AAA 10,000 Beaver, PA, IDA, (Ohio Edison Co.)
(FGIC), 7.05%, 10/1/20 11,669,899
Aaa AAA 3,800 Puerto Rico Electric Power
Authority, (FSA), Variable
Rate, 7/1/02/(1)/ 4,256,000
- ------------------------------------------------------------------------------------
$ 20,357,979
- ------------------------------------------------------------------------------------
Insured-General Obligations -- 6.9%
- ------------------------------------------------------------------------------------
Aaa AAA $ 2,170 Elizabeth Forward, PA, School
District, (MBIA), 0.00%, 9/1/20 $ 641,474
Aaa AAA 2,170 Elizabeth Forward, PA, School
District, (MBIA), 0.00%, 9/1/21 605,061
Aaa AAA 2,170 Elizabeth Forward, PA, School
District, (MBIA), 0.00%, 9/1/22 572,967
Aaa AAA 2,170 Elizabeth Forward, PA, School
District, (MBIA), 0.00%, 9/1/23 542,522
Aaa AAA 2,500 Erie, PA, School District, (MBIA),
0.00%, 5/1/19 801,350
Aaa AAA 2,625 Erie, PA, School District, (MBIA),
0.00%, 5/1/20 789,731
Aaa AAA 2,625 Erie, PA, School District, (MBIA),
0.00%, 5/1/21 745,316
Aaa AAA 3,625 Erie, PA, School District, (MBIA),
0.00%, 5/1/22 974,690
Aaa AAA 5,000 Gateway, PA, School District,
(FGIC), 5.25%, 7/15/27 5,007,550
Aaa AAA 5,175 Hazelton, PA, School District,
(FGIC), 0.00%, 3/1/21 1,482,741
Aaa AAA 7,500 Keystone Oaks, PA, School District,
(AMBAC), Variable Rate, 9/1/16/(1)/ 7,996,875
Aaa AAA 1,430 Mars Area, PA, School District,
(MBIA), 0.00%, 3/1/14 610,396
Aaa AAA 1,900 Philadelphia, PA, (MBIA),
5.00%, 5/15/15 1,866,902
Aaa AAA 3,200 Philadelphia, PA, (MBIA),
5.00%, 5/15/20 3,110,720
Aaa AAA 655 Rochester Area, PA, School
District, (AMBAC), 0.00%, 5/1/10 348,532
Aaa AAA 1,000 Venango, PA, (AMBAC),
6.30%, 12/1/19 1,086,410
- ------------------------------------------------------------------------------------
$ 27,183,237
- ------------------------------------------------------------------------------------
Insured-Hospitals -- 5.4%
- ------------------------------------------------------------------------------------
Aaa AAA $ 2,000 Allegheny County, PA, HDA,
(MBIA), 5.625%, 4/1/27 $ 2,055,860
Aaa AAA 3,750 Allegheny, PA (Magee-Womens
Hospital), (FGIC), 0.00%, 10/1/15 1,462,725
Aaa AAA 1,170 Allegheny, PA, (Children's
Hospital of Pittsburgh), (MBIA),
6.75%, 7/1/08 1,247,407
Aaa AAA 1,400 Armstrong, PA, (Saint Francis
Health Care) (AMBAC), 6.25%, 6/1/13 1,503,138
Aaa AAA 2,500 Armstrong, PA, (Saint Francis
Health Care), (AMBAC), 6.00%,
8/15/08 2,662,550
Aaa AAA 775 Carbon, PA, (Gnaden Memorial
Hospital) (AMBAC), 7.00%, 11/15/14 851,694
Aaa AAA 750 Erie County, PA, Hospital
Authority, (Hamot Health System),
(AMBAC), 7.10%, 2/15/10 828,278
Aaa AAA 230 Lehigh, PA, (Health East, Inc.)
(MBIA), 7.00%, 7/1/15 252,471
Aaa AAA 1,000 Montgomery, PA, (Abington Memorial
Hospital) (AMBAC), Variable Rate,
6/1/11/(1)/ 1,170,000
Aaa AAA 5,000 Philadelphia, PA, Hospital and
Higher Education Authority,
(FGIC), Variable Rate, 2/15/12/(1)/ 5,068,750
</TABLE>
See notes to financial statements
49
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<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 $ 1,500 Scranton-Lackawanna, PA, (Mercy
Health), (MBIA), 6.90%, 1/1/23 $ 1,625,190
Aaa AAA 2,550 Washington, PA, (Shadyside
Hospital), (AMBAC), 5.75%,
12/15/14 2,650,623
- -------------------------------------------------------------------------------------
$ 21,378,686
- -------------------------------------------------------------------------------------
Insured-Industrial Development
Revenue -- 0.3%
- -------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Delaware, PA, (Philadelphia
Water) (FGIC), 6.35%, 8/15/25 $ 1,082,480
- -------------------------------------------------------------------------------------
$ 1,082,480
- -------------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 2.5%
- -------------------------------------------------------------------------------------
Aaa AAA $ 10,000 Commonwealth of Pennsylvania,
(AMBAC), 5.00%, 7/1/15/(2)/ $ 9,779,700
- -------------------------------------------------------------------------------------
$ 9,779,700
- -------------------------------------------------------------------------------------
Insured-Water and Sewer -- 3.2%
- -------------------------------------------------------------------------------------
Aaa AAA $ 3,000 Bethlehem, PA, Water Authority,
(MBIA), 5.20%, 11/15/21 $ 2,946,960
Aaa AAA 3,960 Philadelphia, PA, Water and
Wastewater, (CGIC), 5.00%, 6/15/16 3,865,237
Aaa AAA 2,500 Philadelphia, PA, Water and
Wastewater, (CGIC), Variable
Rate, 6/15/12/(1)/ 2,656,250
Aaa AAA 3,490 Pittsburgh, PA, Water and Sewer
Authority, (FGIC), 4.75%, 9/1/16 3,309,323
- -------------------------------------------------------------------------------------
$ 12,777,770
- -------------------------------------------------------------------------------------
Life Care -- 2.0%
- -------------------------------------------------------------------------------------
NR NR $ 4,050 Delaware, PA, (White Horse
Village), 7.50%, 7/1/18 $ 4,290,003
NR BBB+ 3,620 Delaware, PA, HFA, 5.75%, 12/15/22 3,619,240
- -------------------------------------------------------------------------------------
$ 7,909,243
- -------------------------------------------------------------------------------------
Nursing Homes -- 2.5%
- -------------------------------------------------------------------------------------
NR NR $ 3,500 Montgomery, PA, IDA (Advancement
of Geriatric Health Care
Institute), 8.375%, 7/1/23 $ 3,808,175
NR NR 1,190 Philadelphia, PA, (The
Philadelphia Protestant Home
Project), 8.625%, 7/1/21 1,280,345
NR NR 1,460 Westmoreland, PA, (Highland
Health Systems, Inc.),
9.25%, 6/1/22 1,636,280
NR NR 2,750 Wilkins Area, PA, IDA, (Fairview
Extended Care), 10.25%, 1/1/21 3,271,620
- -------------------------------------------------------------------------------------
$ 9,996,420
- -------------------------------------------------------------------------------------
Pooled Loans -- 5.0%
- -------------------------------------------------------------------------------------
NR A $ 16,950 Pennsylvania Finance Authority,
Beaver County, 6.60%, 11/1/09 $ 18,647,372
NR AA+ 870 Pennsylvania Infrastructure
Investment Authority, (Pennvest),
6.80%, 9/1/10 961,707
- -------------------------------------------------------------------------------------
$ 19,609,079
- -------------------------------------------------------------------------------------
Special Tax Revenue -- 0.1%
- -------------------------------------------------------------------------------------
Baa1 BBB+ $ 500 Puerto Rico Special Tax
Revenue, 7.50%, 7/1/09 $ 526,850
- -------------------------------------------------------------------------------------
$ 526,850
- -------------------------------------------------------------------------------------
Transportation -- 1.4%
- -------------------------------------------------------------------------------------
Baa3 BBB- $ 4,000 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.25%, 6/1/26 $ 4,291,040
Baa3 BBB- 1,000 Puerto Rico Port Authority,
(American Airlines), (AMT),
6.30%, 6/1/23 1,059,730
- -------------------------------------------------------------------------------------
$ 5,350,770
- -------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
50
<PAGE>
Pennsylvania Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Tax-Exempt Investments -- 100%
(identified cost $359,688,720) $394,760,375
- -------------------------------------------------------------------------------------
</TABLE>
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 Pennsylvania
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at July 31, 1997, 31.1% 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 1.1% to 12.7%.
(1) Security has been issued as an inverse floater bond.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
51
<PAGE>
Texas Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 2.6%
- -------------------------------------------------------------------------------
NR NR $ 500 Bell County, TX,
Health Facilities,
(Care Institute,
Inc.),
9.00%, 11/1/24 $ 564,935
- -------------------------------------------------------------------------------
$ 564,935
- -------------------------------------------------------------------------------
Education -- 3.4%
- -------------------------------------------------------------------------------
A NR $ 700 Brazos, TX, Higher
Education
Authority, (AMT),
6.50%, 6/1/04 $ 756,098
- -------------------------------------------------------------------------------
$ 756,098
- -------------------------------------------------------------------------------
Electric Utilities -- 2.2%
- -------------------------------------------------------------------------------
NR BBB $ 500 Guam Power Authority,
5.25%, 10/1/23 $ 484,075
- -------------------------------------------------------------------------------
$ 484,075
- -------------------------------------------------------------------------------
Escrowed / Prerefunded -- 5.0%
- -------------------------------------------------------------------------------
NR NR $ 200 Bexar County, TX,
Health Facilities,
(St. Luke's
Lutheran),
7.00%, 5/1/21 $ 241,542
Aaa NR 1,000 Central Texas
Housing Corp.,
(Single Family),
0.00%, 9/1/16 360,060
Aaa AAA 85 Harris County, TX,
Toll Road Unlimited
Tax and Subordinate
Lien, (AMBAC),
6.625%, 8/15/17 86,791
Aaa AAA 200 Montgomery County,
TX, Hospital
District, (FSA),
6.625%, 4/1/17 223,504
Aaa AAA 150 Texas National
Research Lab Super
Collider, 6.95%,
12/1/12 177,209
- -------------------------------------------------------------------------------
$1,089,106
- -------------------------------------------------------------------------------
General Obligations -- 9.5%
- -------------------------------------------------------------------------------
Aaa AAA $1,000 Bastrop, TX,
Independent School
District U.T.G.O.,
(PSF),
0.00%, 2/15/13 $ 449,680
NR NR 500 Leander, TX, 6.75%,
8/15/16 533,980
Aa2 AA 690 Texas Veterans'
Housing Assistance
U.T., (AMT), 6.70%,
12/1/24 729,937
Aa2 AA 360 Texas Veterans'
Housing Assistance
U.T., (AMT), 6.80%,
12/1/23 382,021
- -------------------------------------------------------------------------------
$2,095,618
- -------------------------------------------------------------------------------
Hospitals -- 12.9%
- -------------------------------------------------------------------------------
NR BBB+ $ 500 Denison, TX,
Hospital Authority,
(Texoma Medical
Center),
6.125%, 8/15/17 $ 513,220
NR BBB+ 500 Denison, TX,
Hospital Authority,
(Texoma Medical
Center),
7.10%, 8/15/24 546,230
Aaa NR 100 Ector County, TX,
Hospital District,
7.30%, 4/15/12 114,678
A2 A- 100 Harris County, TX,
Hospital District,
(Memorial), 7.125%,
6/1/15 115,751
Aa NR 975 Port Arthur, TX,
Health Facilities,
(FHA), 6.50%, 8/1/24 1,041,056
A2 NR 500 Tarrant County, TX,
Methodist Health
System, 6.00%, 9/1/24 515,135
- -------------------------------------------------------------------------------
$2,846,070
- -------------------------------------------------------------------------------
Housing -- 13.3%
- -------------------------------------------------------------------------------
NR AAA $ 80 Bexar County, TX,
HFC, 8.10%, 3/1/24 $ 85,558
NR AAA 500 Dallas, TX, HFC
(GNMA),
7.95%, 12/1/23/(1)/ 534,025
NR AAA 150 North Central, TX,
HFC, (GNMA),
7.875%, 10/1/22 159,711
Aaa AAA 50 Puerto Rico Housing
Finance Corp.,
Single Family
Mortgage Revenue,
(GNMA), 6.85%, 10/15/23 52,902
NR A 500 Texas Department of
Housing and
Community Affairs,
NHP Foundation-Asmara
Project, 6.40%, 1/1/27 523,065
NR A 750 Travis County, TX,
HFC Multifamily, (Travis
Station Apartments),
6.75%, 4/1/19 789,570
NR AAA 725 Travis County, TX,
HFC, (GNMA) (FNMA),
7.05%, 12/1/25 777,345
- -------------------------------------------------------------------------------
$2,922,176
- -------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 12.0%
- -------------------------------------------------------------------------------
Baa1 BBB $ 450 Gulf Coast, TX,
Waste Disposal
Authority, (Champion
International)
(AMT), 7.25%, 4/1/17 $ 491,787
A2 A+ 1,000 Port Corpus Christi, TX,
(Hoechst Celanese
Corp.) (AMT),
6.875%, 4/1/17 1,086,870
NR A 1,000 Trinity River
Authority, TX,
(PCR) (AMT), 6.20%,
3/1/20 1,052,260
- -------------------------------------------------------------------------------
$2,630,917
- -------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
52
<PAGE>
Texas Municipals Portfolio as of July 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Electric Utilities -- 20.3%
- ----------------------------------------------------------------------
Aaa AAA $1,000 Austin, TX,
Combined Utility,
(AMBAC), 6.75%,
11/15/12/(2)/ $1,164,659
Aaa AAA 1,000 Austin, TX, Utility
System, (FGIC),
6.25%, 5/15/16/(3)/ 1,099,110
Aaa AAA 500 Lower Colorado
River Authority
Junior Lien, TX,
(FGIC), 0.00%, 1/1/12 239,880
Aaa AAA 1,000 San Antonio, TX,
Electric and
Natural Gas,
(MBIA), 5.375%,
2/1/18 1,006,780
Aaa AAA 1,395 Texas Municipal
Power Agency,
(MBIA), 0.00%,
9/1/13 609,992
Aaa AAA 1,000 Texas Municipal
Power Agency,
(MBIA), 0.00%,
9/1/17 346,340
- ----------------------------------------------------------------------
$4,466,761
- ----------------------------------------------------------------------
Insured-Hospitals -- 7.5%
- ----------------------------------------------------------------------
Aaa AAA $ 500 Harris County, TX,
HFC, (Hermann
Hospital) (MBIA),
6.375%, 10/1/24 $ 542,250
Aaa AAA 1,000 Tyler County, TX,
HFC, (Mother
Frances Hospital)
(FGIC),
6.50%, 7/1/22 1,102,889
- ----------------------------------------------------------------------
$1,645,139
- ----------------------------------------------------------------------
Lease Revenue/
Certificates of Participation -- 1.2%
- ----------------------------------------------------------------------
NR BBB- $ 250 Rio Grande, TX,
Independent School
District Lease,
6.75%, 7/15/10 $ 267,135
- ----------------------------------------------------------------------
$ 267,135
- ----------------------------------------------------------------------
Transportation -- 10.1%
- ----------------------------------------------------------------------
NR NR $ 250 Abia Dev. Corp.,
TX, (Austin
Cargoport), 9.25%,
10/1/21 $ 275,498
Baa2 BBB- 505 Alliance Airport
Authority,
(American Airlines)
(AMT), 7.50%,
12/1/29 549,773
Baa2 BBB- 225 Dallas-Fort Worth,
TX, Airport,
(American Airlines)
(AMT),
7.50%, 11/1/25 244,589
Baa3 BB+ 300 Dallas-Fort Worth,
TX, Airport, (Delta
Airlines) (AMT),
7.125%, 11/1/26 322,206
NR BBB 755 Guam Airport
Authority, (AMT),
6.70%, 10/1/23 813,807
Aa2 AA 25 Harris County, TX,
Toll Road
Subordinate Lien,
6.75%, 8/1/14 27,525
- ----------------------------------------------------------------------
$2,233,398
- ----------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $20,172,048) $22,001,428
- ----------------------------------------------------------------------
</TABLE>
AMT- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
HFC - Housing Finance Corporation
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, 1997, 33.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 1.0% to 11.4% of total investments.
/(1)/Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/When-issued security.
/(3)/Security has been segregated to cover when-issued securities.
See notes to financial statements
53
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ---------------------------------------------------------------------------------------------------------------------------
Investments --
Identified cost $ 100,333,893 $ 38,187,386 $ 162,032,152 $ 133,350,836
Unrealized appreciation 10,701,415 3,910,265 9,570,406 13,046,983
- ---------------------------------------------------------------------------------------------------------------------------
Investments, at value (Note 1A) $ 111,035,308 $ 42,097,651 $ 171,602,558 $ 146,397,819
- ---------------------------------------------------------------------------------------------------------------------------
Cash $ 396,176 $ 876 $ 973,034 $ 1,695,930
Receivable for investments sold -- -- 905,692 --
Interest receivable 1,081,951 542,137 2,018,844 2,196,361
Deferred organization expenses (Note 1D) 887 229 1,574 1,508
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 112,514,322 $ 42,640,893 $ 175,501,702 $ 150,291,618
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Demand note payable (Note 5) $ -- $ 3,000 $ 478,000 $ --
Payable for daily variation margin
on open financial futures
contracts (Note 1E) 34,875 12,375 31,125 54,605
Payable to affiliate for Trustees'
fees (Note 2) 735 -- -- 956
Accrued expenses 6,919 1,074 14,987 12,411
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 42,529 $ 16,449 $ 524,112 $ 67,972
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors'
interest in Portfolio $ 112,471,793 $ 42,624,444 $ 174,977,590 $ 150,223,646
- ---------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital
contributions and withdrawals $ 102,398,651 $ 38,937,115 $ 165,967,901 $ 138,179,628
Net unrealized appreciation of
investments and financial futures
contracts (computed on the basis
of identified cost) 10,073,142 3,687,329 9,009,689 12,044,018
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 112,471,793 $ 42,624,444 $ 174,977,590 $ 150,223,646
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
54
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of July 31, 1997
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 63,057,066 $316,103,220 $359,688,720 $ 20,172,048
Unrealized appreciation 6,537,383 32,866,193 35,071,655 1,829,380
- ------------------------------------------------------------------------------------------------------------------------------
Investment at value (Note 1A) $ 69,594,449 $348,969,413 $394,760,375 $ 22,001,428
- ------------------------------------------------------------------------------------------------------------------------------
Cash $ 330 $ 266 $ 385 $ 520,405
Receivable for investments sold 416,080 -- 5,939,677 --
Interest receivable 815,179 4,381,706 5,229,597 341,723
Deferred organization expenses (Note 1D) 309 2,330 2,988 209
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $ 70,826,347 $353,353,715 $405,933,022 $ 22,863,765
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Payable for when-issued securities (Note 1G) $ -- $ -- $ -- $ 1,046,570
Payable for investments purchased -- -- 1,602,746 --
Demand note payable (Note 5) 131,000 540,000 1,962,000 134,000
Payable for daily variation margin on open
financial futures contracts (Note 1E) 15,937 24,375 140,413 4,500
Payable to affiliate for Trustees'
fees (Note 2) 568 1,455 1,621 13
Accrued expenses 5,168 15,815 5,502 2,541
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 152,673 $ 581,645 $ 3,712,282 $ 1,187,624
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors'
interest in Portfolio $ 70,673,674 $352,772,070 $402,220,740 $ 21,676,141
- ------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital
contributions and withdrawals $ 64,605,947 $320,953,467 $369,728,139 $ 19,927,829
Net unrealized appreciation of
investments and financial futures
contracts (computed on the basis
of identified cost) 6,067,727 31,818,603 32,492,601 1,748,312
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 70,673,674 $352,772,070 $402,220,740 $ 21,676,141
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
55
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest $ 7,268,691 $ 2,695,514 $ 10,879,408 $ 9,610,630
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 7,268,691 $ 2,695,514 $ 10,879,408 $ 9,610,630
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 482,775 $ 113,698 $ 771,883 $ 676,686
Compensation of Trustees not members of
the Investment Adviser's organization
(Note 2) 8,703 1,648 9,552 11,340
Custodian fee (Note 1I) 61,116 25,407 96,161 77,993
Legal and accounting services 24,111 20,821 26,538 27,761
Bond pricing 9,660 4,225 10,253 9,457
Amortization of organization expenses (Note 1D) 1,792 617 2,621 2,493
Registration fees 125 -- -- --
Miscellaneous 8,675 5,055 45,398 30,088
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 596,957 $ 171,471 $ 962,406 $ 835,818
- -----------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 11,039 $ 15,644 $ 8,505 $ 23,524
- ----------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 11,039 $ 15,644 $ 8,505 $ 23,524
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 585,918 $ 155,827 $ 953,901 $ 812,294
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 6,682,773 $ 2,539,687 $ 9,925,507 $ 8,798,336
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,885,489 $ 778,185 $ 1,328,014 $ 2,069,770
Financial futures contracts (1,086,332) (331,557) (855,720) (2,033,737)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investment transactions $ 799,157 $ 446,628 $ 472,294 $ 36,033
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 5,208,662 $ 2,272,499 $ 7,521,283 $ 7,002,953
Financial futures contracts (270,132) (176,826) (452,852) (526,094)
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 4,938,530 $ 2,095,673 $ 7,068,431 $ 6,476,859
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 5,737,687 $ 2,542,301 $ 7,540,725 $ 6,512,892
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 12,420,460 $ 5,081,988 $ 17,466,232 $ 15,311,228
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
56
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Minnesota Portfolio New Jersey Portfolio Pennsylvania Portfolio Texas Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Investment Income (Note 1B)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest $ 4,433,353 $ 23,413,127 $ 27,256,842 $ 1,395,209
- --------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 4,433,353 $ 23,413,127 $ 27,256,842 $ 1,395,209
- --------------------------------------------------------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 252,187 $ 1,707,028 $ 1,982,739 $ 41,158
Compensation of Trustees not members
of the Investment Adviser's
organization (Note 2) 6,729 17,286 19,254 40
Custodian fee (Note 1I) 40,161 158,061 183,435 14,279
Legal and accounting services 19,651 36,962 36,295 15,512
Bond pricing 8,491 12,311 10,543 6,034
Amortization of organization
expenses (Note 1D) 1,019 4,464 5,278 602
Interest expense (Note 5) -- -- -- 4,889
Miscellaneous 11,757 46,155 82,289 1,636
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 339,995 $ 1,982,267 $ 2,319,833 $ 84,150
- --------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1) $ 19,539 $ 53,187 $ 183,435 $ 5,671
- --------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 19,539 $ 53,187 $ 183,435 $ 5,671
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 320,456 $ 1,929,080 $ 2,136,398 $ 78,479
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 4,112,897 $ 21,484,047 $ 25,120,444 $ 1,316,730
- --------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions
(identified cost basis) $ 648,772 $ 4,417,150 $ 4,052,612 $ 158,144
Financial futures contracts (620,151) (2,432,682) (5,166,232) (170,143)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investment transactions $ 28,621 $ 1,984,468 $ (1,113,620) $ (11,999)
- --------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments $ 3,179,004 $ 15,063,481 $ 20,122,717 $ 1,183,287
Financial futures contracts (392,847) (859,551) (1,367,008) (68,884)
- --------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
of investments $ 2,786,157 $ 14,203,930 $ 18,755,709 $ 1,114,403
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments $ 2,814,778 $ 16,188,398 $ 17,642,089 $ 1,102,404
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations $ 6,927,675 $ 37,672,445 $ 42,762,533 $ 2,419,134
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
57
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Arizona Portfolio Colorado Portfolio Connecticut Portfolio Michigan Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,682,773 $ 2,539,687 $ 9,925,507 $ 8,798,336
Net realized gain on investment
transactions 799,157 446,628 472,294 36,033
Net change in unrealized
appreciation (depreciation)
of investments 4,938,530 2,095,673 7,068,431 6,476,859
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations $ 12,420,460 $ 5,081,988 $ 17,466,232 $ 15,311,228
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 7,001,783 $ 4,009,912 $ 9,762,822 $ 3,699,109
Withdrawals (36,811,997) (11,883,030) (39,868,349) (42,251,299)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $(29,810,214) $(7,873,118) $(30,105,527) $(38,552,190)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $(17,389,754) $(2,791,130) $(12,639,295) $(23,240,962)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $129,861,547 $ 45,415,574 $187,616,885 $173,464,608
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $112,471,793 $ 42,624,444 $174,977,590 $150,223,646
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
58
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1997
<TABLE>
<CAPTION>
Minnesota New Jersey Pennsylvania Texas
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,112,897 $ 21,484,047 $ 25,120,444 $ 1,316,730
Net realized gain (loss) on
investment transactions 28,621 1,984,468 (1,113,620) (11,999)
Net change in unrealized
appreciation (depreciation)
of investments 2,786,157 14,203,930 18,755,709 1,114,403
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations $ 6,927,675 $ 37,672,445 $ 42,762,533 $ 2,419,134
- ----------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,877,845 $ 20,443,481 $ 19,109,521 $ 1,759,693
Withdrawals (17,221,919) (91,588,197) (107,833,175) (6,869,522)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (12,344,074) $ (71,144,716) $ (88,723,654) $ (5,109,829)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (5,416,399) $ (33,472,271) $ (45,961,121) $ (2,690,695)
- ----------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
At beginning of year $ 76,090,073 $ 386,244,341 $ 448,181,861 $ 24,366,836
- ----------------------------------------------------------------------------------------------------------------------
At end of year $ 70,673,674 $ 352,772,070 $ 402,220,740 $ 21,676,141
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
59
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Arizona Colorado Connecticut Michigan
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
Net change in unrealized
appreciation (depreciation)
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)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (24,529,427) $ (4,060,947) $ (21,763,863) $ (31,768,390)
- ----------------------------------------------------------------------------------------------------------------------
Net 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
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
60
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended July 31, 1996
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Minnesota Portfolio New Jersey Portfolio Pennsylvania Portfolio Texas Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
Net 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)
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (12,587,071) $ (51,892,380) $ (88,133,202) $ (5,956,364)
- ---------------------------------------------------------------------------------------------------------------------------------
Net 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
61
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Arizona Portfolio Colorado Portfolio
---------------------------------------------- ------------------------------------------
Year Ended Year Ended
---------------------------------------------- ------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
---------------------------------- ---------- ------------------------------- ---------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- -------------------------------------------------------------------------------------------------------------------------
Ratios to
average daily net assets:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses (1) 0.50% 0.51% 0.52% 0.46%+ 0.42%+ 0.40% 0.40% 0.25% 0.02%+ 0.06%+
Net expenses, after
custodian fee reduction 0.49% 0.50% -- -- -- 0.36% 0.36% -- -- --
Net investment income 5.56% 5.53% 5.81% 5.43%+ 5.46%+ 5.86% 5.75% 6.05% 5.73%+ 5.60%+
Portfolio Turnover 10% 18% 22% 23% 107% 14% 53% 52% 23% 10%
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $112,472 $129,862 $144,521 $154,068 $133,539 $42,624 $45,416 $46,077 $44,399 $24,346
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Colorado Portfolio may reflect a reduction of
the Investment Advisor fee and/or an allocation of expenses to the Investment
Advisor. Had such action not been taken, the ratios would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses /(1)/ 0.42% 0.40% 0.35%+ 0.35%+
Net expenses, after custodian fee reduction 0.38% -- -- --
Net investment income 5.73% 5.90% 5.40%+ 5.31%+
- -------------------------------------------------------------------------------------------------------------------------
</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 years ended July 31, 1996 and periods
thereafter 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 prior periods have not been adjusted to reflect this change.
See notes to financial statements
62
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Connecticut Portfolio Michigan Portfolio
------------------------------------------------------- --------------------------------------------
Year Ended Year Ended
------------------------------------------------------- --------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
------------------------------------------- --------- --------------------------------- ---------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratios to average
daily net assets:
- -------------------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.53% 0.52% 0.53% 0.47%+ 0.46%+ 0.52% 0.54% 0.48% 0.47%+ 0.44%+
Net expenses, after
custodian fee
reduction 0.53% 0.50% -- -- -- 0.50% 0.52% -- -- --
Net investment income 5.50% 5.49% 5.77% 5.40%+ 5.45%+ 5.45% 5.50% 5.85% 5.48%+ 5.46%+
Portfolio Turnover 11% 23% 29% 10% 10% 16% 49% 54% 45% 20%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $174,978 $187,617 $195,276 $192,038 $159,848 $150,224 $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 years ended July 31, 1996 and periods thereafter
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 prior periods have not been
adjusted to reflect this change.
See notes to financial statements
63
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Minnesota Portfolio New Jersey Portfolio
----------------------------------------- ------------------------------------------
Year Ended Year Ended
----------------------------------------- ------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
------------------------------ ---------- ------------------------------ -----------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- -------------------------------------------------------------------------------------------------------------------------
Ratios to
average daily net assets:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses (1) 0.47% 0.48% 0.47% 0.45%+ 0.40%+ 0.54% 0.53% 0.52% 0.50%+ 0.50%+
Net expenses, after
custodian fee reduction 0.44% 0.46% -- -- -- 0.52% 0.52% -- -- --
Net investment income 5.71% 5.69% 5.83% 5.50%+ 5.58%+ 5.84% 5.82% 5.96% 5.62%+ 5.67%+
Portfolio Turnover 22% 45% 76% 20% 10% 24% 39% 54% 25% 12%
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $70,674 $76,090 $82,968 $84,005 $67,019 $352,772 $386,244 $411,038 $423,854 $393,677
- -------------------------------------------------------------------------------------------------------------------------
</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 and periods thereafter
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 prior periods have not been adjusted to
reflect this change.
See notes to financial statements
64
<PAGE>
EV Municipals Portfolios as of July 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Pennsylvania Portfolio Texas Portfolio
------------------------------------------------ --------------------------------------------
Year Ended Year Ended
------------------------------------------------ --------------------------------------------
July 31, Sept. 30, July 31, Sept. 30,
----------------------------------- --------- -------------------------------- ---------
1997 1996 1995 1994* 1993** 1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to
average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.55% 0.54% 0.49% 0.48%+ 0.50%+ 0.37% 0.32% 0.08% 0.00%+ 0.03%+
Net expenses, after
custodian fee reduction 0.51% 0.50% -- -- -- 0.35% 0.27% -- -- --
Net investment income 5.96% 5.90% 6.02% 5.66%+ 5.71%+ 5.79% 5.81% 6.20% 5.69%+ 5.82%+
Portfolio Turnover 17% 30% 44% 21% 17% 17% 39% 49% 27% 8%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000s omitted) $402,221 $448,182 $502,250 $536,786 $497,001 $21,676 $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 an allocation of expenses to the Investment
Adviser. Had such action not been taken, the ratios would have been as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Expenses/(1)/ 0.42% 0.35% 0.37%+ 0.42%+
Expenses after custodian fee 0.37% -- -- --
reduction
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 years ended July 31, 1996 and periods
thereafter 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 prior periods have not been adjusted to reflect this change.
See notes to financial statements
65
<PAGE>
EV Municipals Portfolio as of July 31, 1997
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, deduction
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 Portfolios
66
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
record when-issued securities on trade date and maintain 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 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. Pursuant to the custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances each Portfolio maintains with IBT. All significant credit
balances used to reduce each Portfolio's custodian fees are 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, 1997, each Portfolio paid advisory fees as
follows:
<TABLE>
<CAPTION>
Portfolio Amount Effective Rate*
- -----------------------------------------------------------
<S> <C> <C>
Arizona $ 482,775 0.40%
Colorado 113,698 0.26%
Connecticut 771,883 0.43%
Michigan 676,686 0.42%
Minnesota 252,187 0.35%
New Jersey 1,707,028 0.46%
Pennsylvania 1,982,739 0.47%
Texas 41,158 0.18%
</TABLE>
* Advisory fees paid as a percentage of average daily
net assets.
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, 1997, 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 options and short-term obligations, for the year ended July 31,
1997 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Arizona Portfolio
-----------------------------------------------------
Purchases $12,128,826
Sales 39,144,161
Colorado Portfolio
-----------------------------------------------------
Purchases $ 6,054,087
Sales 11,606,010
Connecticut Portfolio
-----------------------------------------------------
Purchases $19,479,187
Sales 43,558,639
Michigan Portfolio
-----------------------------------------------------
Purchases $25,182,510
Sales 60,493,772
Minnesota Portfolio
-----------------------------------------------------
Purchases $15,827,661
Sales 24,808,420
New Jersey Portfolio
-----------------------------------------------------
Purchases $87,291,588
Sales 141,546,106
</TABLE>
67
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<S> <C>
Pennsylvania Portfolio
-----------------------------------------------------
Purchases $71,293,527
Sales 145,751,814
Texas Portfolio
-----------------------------------------------------
Purchases $ 3,930,670
Sales 8,145,375
</TABLE>
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, 1997, as computed on a
federal income tax basis, are as follows:
<TABLE>
<S> <C>
Arizona Portfolio
-----------------------------------------------------
Aggregate Cost $ 100,333,893
-----------------------------------------------------
Gross unrealized appreciation $ 10,701,415
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 10,701,415
-----------------------------------------------------
Colorado Portfolio
-----------------------------------------------------
Aggregate Cost $ 38,187,386
-----------------------------------------------------
Gross unrealized appreciation $ 3,910,265
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 3,910,265
-----------------------------------------------------
Connecticut Portfolio
-----------------------------------------------------
Aggregate Cost $162,032,152
-----------------------------------------------------
Gross unrealized appreciation $ 9,577,332
Gross unrealized depreciation (6,926)
-----------------------------------------------------
Net unrealized appreciation $ 9,570,406
-----------------------------------------------------
Michigan Portfolio
-----------------------------------------------------
Aggregate Cost $133,350,836
-----------------------------------------------------
Gross unrealized appreciation $ 13,046,983
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 13,046,983
-----------------------------------------------------
Minnesota Portfolio
-----------------------------------------------------
Aggregate Cost $ 63,057,066
-----------------------------------------------------
Gross unrealized appreciation $ 6,537,383
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 6,537,383
-----------------------------------------------------
New Jersey Portfolio
-----------------------------------------------------
Aggregate Cost $316,103,220
-----------------------------------------------------
Gross unrealized appreciation $ 32,903,699
Gross unrealized depreciation (37,506)
-----------------------------------------------------
Net unrealized appreciation $ 32,866,193
-----------------------------------------------------
Pennsylvania Portfolio
-----------------------------------------------------
Aggregate Cost $359,688,720
-----------------------------------------------------
Gross unrealized appreciation $ 35,071,655
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 35,071,655
-----------------------------------------------------
Texas Portfolio
-----------------------------------------------------
Aggregate Cost $ 20,172,048
-----------------------------------------------------
Gross unrealized appreciation $ 1,829,380
Gross unrealized depreciation --
-----------------------------------------------------
Net unrealized appreciation $ 1,829,380
-----------------------------------------------------
</TABLE>
5 Line of Credit
------------------------------------------------------------------------------
The Portfolios participate with other portfolios and funds managed by BMR and
EVM and their affiliates in a committed $120 million unsecured line of credit
agreement with a group of banks. Borrowings will be made by the portfolios or
funds solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio or fund
based on its borrowings at the bank's base rate or at an amount above either
the bank's adjusted certificate of deposit rate, Eurodollar rate or federal
funds effective rate. In addition, a fee computed at an annual rate of 0.15%
on the daily unused portion of the facility is allocated among the
participating portfolios and funds at the end of each
68
<PAGE>
EV Municipals Portfolio as of July 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
quarter. At July 31, 1997, the Colorado Portfolio, Connecticut Portfolio,
Minnesota Portfolio, New Jersey Portfolio, Pennsylvania Portfolio and Texas
Portfolio had balances outstanding pursuant to this line of credit of $3,000,
$478,000, $131,000, $540,000, $1,962,000 and $134,000, respectively. At July
31, 1997, the average daily loan balance was $190,722 and the average
interest rate was 5.95% for the Texas Portfolio. The maximum borrowing
outstanding for the Texas Portfolio at any time during the year ended July
31, 1997 was $892,000. The Portfolios (with the exception of the Texas
Portfolio) did not have any significant borrowings or allocated fees during
the year ended July 31, 1997.
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 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, 1997,
is as follows:
<TABLE>
<CAPTION>
Futures
Contracts
Expiration Net Unrealized
Portfolio Date Contracts Position Depreciation
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona 9/97 93 U.S. Treasury Bonds Short $ 628,273
--------------------------------------------------------------------------------
Colorado 9/97 33 U.S. Treasury Bonds Short 222,936
--------------------------------------------------------------------------------
Connecticut 9/97 83 U.S. Treasury Bonds Short 560,717
--------------------------------------------------------------------------------
Michigan 9/97 147 U.S. Treasury Bonds Short 1,002,965
--------------------------------------------------------------------------------
Minnesota 9/97 65 U.S. Treasury Bonds Short 469,656
--------------------------------------------------------------------------------
New Jersey 9/97 140 U.S. Treasury Bonds Short 1,047,590
--------------------------------------------------------------------------------
Pennsylvania 9/97 378 U.S. Treasury Bonds Short 2,579,054
--------------------------------------------------------------------------------
Texas 9/97 12 U.S. Treasury Bonds Short 81,068
--------------------------------------------------------------------------------
</TABLE>
At July 31, 1997, the Portfolios had sufficient cash
and/or securities to cover margin requirements on open futures contracts.
69
<PAGE>
EV Municipals Portfolio as of July 31, 1997
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, and 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,
1997, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended July 31, 1997 and 1996
and supplementary data for the years ended July 31, 1997, 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,
1997, 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 positions 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, 1997, 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
September 5, 1997
70
<PAGE>
EV Traditional Municipals Funds as of July 31, 1997
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
EV Traditional Municipals Funds
<S> <C>
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 and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Robert B. MacIntosh Banking, Harvard University Graduate School of Business Administration
Vice President
Norton H. Reamer
James L. O'Connor President and Director, United Asset
Treasurer Management Corporation
Alan R. Dynner John L. Thorndike
Secretary Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
<CAPTION>
Municipals Portfolios
<S> <C>
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 and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Robert B. MacIntosh Banking, Harvard University Graduate School of Business Administration
Vice President of Arizona,
Colorado, Connecticut, Norton H. Reamer
Michigan, Minnesota, President and Director, United Asset
New Jersey, Pennsylvania and Management Corporation
Texas Municipals Portfolios
and Portfolio Manager of John L. Thorndike
Minnesota and New Jersey Formerly Director, Fiduciary Company Incorporated
Municipals Portfolios
Jack L. Treynor
Cynthia J. Clemson Investment Adviser and Consultant
Vice President and Portfolio
Manager of Arizona
Municipals Portfolio
William H. Ahearn, Jr.
Vice President and Portfolio
Manager of Colorado
Municipals Portfolio
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 Portfolios
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
</TABLE>
71
<PAGE>
Investment Advisor of the Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of the Funds
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Eaton Vance
Municipals Trust
24 Federal Street
Boston, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
T-8CSRC-8/97
