<PAGE>
[LOGO OF EATON [PHOTO OF BRICK WALL AND EDUCATION
VANCE APPEARS HERE] SIGN APPEARS HERE]
Semiannual Report March 31, 1997
MASSACHUSETTS
MUNICIPAL
BOND
[PHOTO OF HIGHWAY
APPEARS HERE] PORTFOLIO
Eaton Vance
Global Management-Global Distribution
[PHOTO OF BRIDGE APPEARS HERE]
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Massachusetts' economy is benefiting from a diverse base of growing industry
sectors, including high technology, financial services, education, and health
care.
. The high technology sector alone - which includes biotechnology, software,
communications, and surgical instruments - represents 9.1% of total
employment, the highest percentage for this sector in the nation.
. Recent economic indicators confirm a strong, healthy business climate.
Unemployment in February, 1997 was 3.7%, significantly lower than the U.S.
rate of 5.3%. New jobs increased by 64,400 in the past 12 months, a 2.1%
growth rate. Finally, consumer confidence reached a five-year high in
January, 1997.
. Sound financial management at the state level has also helped the
Massachusetts economy. Governor William Weld has balanced the budget every
year since his election in 1990, earning higher ratings on the Commonwealth's
general obligation debt.
Management Discussion
- --------------------------------------------------------------------------------
. The bond market has been volatile in the last six months. Traders have been
reacting to reports of growth in the economy and a tightening labor market,
leading to an overall increase in yields.
. Management has increased the Fund's holdings in the hospital sector because
the partnerships and mergers among the large, successful facilities have made
this sector more attractive.
. The Fund also has more low-coupon holdings, which were added to offset
existing holdings of high-coupon bonds. This "barbell"structure helps improve
performance in varying market conditions.
The Fund
- --------------------------------------------------------------------------------
. During the six months ended March 31, 1997, the Fund had a total return of
1.9%.
. This return resulted from a decrease in net asset value per share to $9.48 on
March 31, 1997 from $9.56 on September 30, 1996, and the reinvestment of
$0.266 per share in tax-free income dividends./1/
. Based on the Fund's most recent dividend, and a net asset value of $9.48 per
share, the Fund's distribution rate on March 31, 1997 was 5.59%.
. To equal 5.59% in a taxable investment, a couple in the 43.68% combined
federal and state tax bracket would need a yield of 9.93%.
Your Investment at Work
- --------------------------------------------------------------------------------
Massachusetts Health and Educational Facilities Authority Revenue Bonds -
Amherst College
. This bond issue financed the capital maintenance, repairs, and renovations to
several facilities owned by Amherst College.
. The college, a highly regarded educational institution founded in 1821,
offers a rigorous liberal arts curriculum to approximately 1,570 students
from virtually every state in the nation and many foreign countries.
. Proceeds have helped finance projects such as utility systems upgrades, roof
repairs, dormitory renovations, and the resurfacing of campus roadways.
- --------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
================================================================================
/1/ A portion of the Fund's income could be subject to federal income tax
and/or alternative minimum tax.
/2/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. This Fund does not have a
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.
/3/ Based on market value as of 3/31/97. May not represent the Portfolio's
current or future investments.
/4/ Private insurance does not remove the interest rate risks that are
associated with these investments.
- --------------------------------------------------------------------------------
Fund Information
as of March 31, 1997
Performance/2/
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
One Year 5.1%
Life of Fund (6/17/93) 4.3
5 Largest Sectors/3/
- --------------------------------------------------------------------------------
By total investments
- -----------------------------------
Housing 14.9%
- -----------------------------------
- --------------------------------
Hospitals 13.8%
- --------------------------------
- ----------------------------
Transportation 10.7%
- ----------------------------
- ---------------------------
Water and sewer 10.4%
- ---------------------------
- --------------------------
Insured hospitals 7.8%/4/
- --------------------------
Portfolio Overview/3/
- --------------------------------------------------------------------------------
Number of Issues 86
Average Maturity 22.7 Yrs.
Effective Maturity 12.8 Yrs.
Average Rating A
Average Call 6.9 Yrs.
Average Dollar Price $97.05
2
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of March 31, 1997
Assets
- -------------------------------------------------------------------------------
<S> <C>
Investment in Massachusetts Municipals Portfolio, at
value (Note 1A) (identified cost, $6,627,747) $ 6,673,279
Receivable from Administrator (Note 4) 9,081
- -------------------------------------------------------------------------------
Total assets $ 6,682,360
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Distributions payable $ 14,295
Payable to affiliate for Trustees' fees (Note 4) 41
Accrued expenses 1,669
- -------------------------------------------------------------------------------
Total liabilities $ 16,005
- -------------------------------------------------------------------------------
Net Assets for 703,216 shares of
beneficial interest outstanding $ 6,666,355
- -------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------
Paid-in capital $ 7,436,499
Accumulated net realized loss on investments
(computed on basis of identified cost) (807,872)
Accumulated distributions in excess of net (7,804)
investment income
Net unrealized appreciation of investments
(computed on the basis of identified cost) 45,532
- -------------------------------------------------------------------------------
Total $ 6,666,355
- -------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share
- -------------------------------------------------------------------------------
($6,666,355 / 703,216 shares of
beneficial interest outstanding) $ 9.48
- -------------------------------------------------------------------------------
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
March 31, 1997
Investment Income (Note 1B)
- -------------------------------------------------------------------------------
<S> <C>
Interest income allocated from Portfolio $ 214,599
Expenses allocated from Portfolio (18,709)
- -------------------------------------------------------------------------------
Net investment income from Portfolio $ 195,890
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 80
Legal and accounting services 6,904
Printing and postage 4,584
Transfer and dividend disbursing agent fees 2,011
Custodian fee 1,500
Amortization of organization expenses (Note 1D) 981
Registration fees 100
Miscellaneous 384
- -------------------------------------------------------------------------------
Total expenses $ 16,544
- -------------------------------------------------------------------------------
Less Allocations --
Preliminary allocation of expenses to the
Administrator (Note 4) $ 9,081
- -------------------------------------------------------------------------------
Total expense reductions $ 9,081
- -------------------------------------------------------------------------------
Net expenses $ 7,463
- -------------------------------------------------------------------------------
Net investment income $ 188,427
- -------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- -------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 90,031
Financial futures contracts (44,679)
- -------------------------------------------------------------------------------
Net realized gain on investment transactions $ 45,352
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ (110,620)
Financial futures contracts 11,007
- -------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ (99,613)
- -------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (54,261)
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 134,166
- -------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
3
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) March 31, 1997 Year Ended
in Net Assets (Unaudited) September 30,1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 188,427 $ 387,696
Net realized gain on investment
transactions 45,352 32,236
Net change in unrealized appreciation
(depreciation) of investments (99,613) 28,150
- ----------------------------------------------------------------------------------------
Net increase in net assets from operations $ 134,166 $ 448,082
- ----------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (188,427) $ (387,696)
In excess of net investment income (257) (506)
- ----------------------------------------------------------------------------------------
Total distributions to shareholders $ (188,684) $ (388,202)
- ----------------------------------------------------------------------------------------
Transactions in shares of beneficial interest
(Note 3) --
Proceeds from sale of shares $ 309,219 $ 629,549
Net asset value of shares issued to
shareholders in payment of
distributions declared 57,254 101,348
Cost of shares redeemed (585,824) (1,036,510)
- ----------------------------------------------------------------------------------------
Net decrease in net assets from
Fund share transactions $ (219,351) $ (305,613)
- ----------------------------------------------------------------------------------------
Net decrease in net assets $ (273,869) $ (245,733)
- ----------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------
At beginning of period $6,940,224 $7,185,957
- ----------------------------------------------------------------------------------------
At end of period $6,666,355 $6,940,224
- ----------------------------------------------------------------------------------------
Accumulated
distributions in excess
of net investment income
included in net assets
- ----------------------------------------------------------------------------------------
At end of period $ (7,804) $ (7,547)
- ----------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
4
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1997 ---------------------------------------------------
(Unaudited) 1996 1995 1994 1993*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $ 9.560 $ 9.510 $ 9.220 $10.260 $10.000
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.265 $ 0.534 $ 0.546 $ 0.548 $ 0.141
Net realized and unrealized gain (loss) on
investments (0.079) 0.051 0.290 (1.026) 0.284
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.186 $ 0.585 $ 0.836 $(0.478) $ 0.425
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.266) $(0.534) $(0.546) $(0.548) $(0.141)
In excess of net investment income --** (0.001) -- (0.004) (0.024)
In excess of net realized gain on investments -- -- -- (0.010) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.266) $(0.535) $(0.546) $(0.562) $(0.165)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 9.480 $ 9.560 $ 9.510 $ 9.220 $10.260
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 1.94% 6.28% 9.37% (4.79)% 4.04%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 6,666 $ 6,940 $ 7,186 $ 9,338 $ 5,063
Ratio of net expenses to average net assets /(2)//(3)/ 0.78%+ 0.76% 0.63% 0.60% 1.21%+
Ratio of net expenses to average net assets after
custodian fee reduction /(2)/ 0.77%+ 0.75% 0.60% -- --
Ratio of net investment income to average net assets 5.55%+ 5.56% 5.93% 5.65% 4.80%+
</TABLE>
+ The operating expenses of the Fund may reflect an allocation of expenses to
the Administrator. Had such action 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)/ 1.05%+ 0.95% 0.88% 1.12%
Expenses after custodian fee reduction /(2)/ 1.04%+ 0.94% 0.85% --
Net investment income 5.28%+ 5.37% 5.68% 5.13%
Net investment income per share $ 0.252 $ 0.516 $ 0.523 $ 0.498
</TABLE>
+ Annualized.
* For the period from the start of business, June 17, 1993, to September 30,
1993.
** Distributions in excess of net investment income were 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 the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended September 30, 1995 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 the prior periods have not been adjusted to reflect this
change.
See notes to financial statements
5
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Massachusetts Municipal Bond Portfolio (the Fund) is a non-diversified series
of Eaton Vance Municipals Trust (the Trust). The Trust is an entity of the
type commonly known as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in
interests in Massachusetts Municipals Portfolio (the Portfolio), a New York
Trust, having the same investment objective as the Fund. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio (1.2% at March 31, 1997). The performance
of the Fund is directly affected by the performance of the Portfolio. The
financial statements of the Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuations -- Valuation of securities by the portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. At September 30,
1996, the Fund, for federal income tax purposes, had a capital loss carryover
of $791,555 which will reduce taxable income arising from future net realized
gain on investments, if any, to the extent permitted by the Internal Revenue
Code and thus will reduce the amount of distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax. Such capital loss carryover will expire on September
30, 2004, ($494,027) and September 30, 2003, ($297,528). Dividends paid by
the Fund from net interest on tax-exempt municipal bonds allocated from the
Portfolio are not includable by shareholders as gross income for Federal
income tax purposes because the Fund and the Portfolio intend to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Fund to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986 may be considered a tax preference item to shareholders.
D Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
F Other -- Investment transactions are accounted for on a trade date basis.
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or the Portfolio maintains 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.
H Interim Financial Information -- The interim financial statements relating
to March 31, 1997 and for the six month period then ended have not been
audited by independent certified public accountants, but in the opinion of
the Fund's management, reflect all adjustments, consisting of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
2 Distributions to Shareholders
-----------------------------------------------------------------------------
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest capital gain distributions in additional shares of
a Fund at the net asset value as of the ex-dividend date. Distributions are
paid in
6
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
the form of additional shares or, at the election of the shareholder, in
cash.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition
or classification of income between the financial statements and tax earnings
and profits which result in temporary over distributions for financial
statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains. Permanent differences
between book and tax accounting relating to distributions are reclassified to
paid-in capital. The tax treatment of distributions for the calendar year
will be reported to shareholders prior to February 1, 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 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>
Six Months Ended
March 31, 1997 Year Ended
(Unaudited) September 30, 1996
-----------------------------------------------------------------------------
<S> <C> <C>
Sales 32,008 65,889
Issued to shareholders electing to
receive payments of distributions in
Fund shares 5,961 10,560
Redemptions (60,486) (106,480)
-----------------------------------------------------------------------------
Net decrease (22,517) (30,031)
-----------------------------------------------------------------------------
</TABLE>
4 Transactions with Affiliates
-----------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. To enhance the net income of the Fund for
the six month ended March 31, 1997, $9,081 of expenses related to the
operation of the Fund were allocated, on a preliminary basis, to EVM. Except
as to Trustees of the Fund and the Portfolio who are not members of EVM's or
BMR's organization, officers and Trustees receive remuneration for their
services to the Fund out of the investment adviser fee earned by BMR.
Certain officers and Trustees of the Fund and the Portfolio are
directors/trustees of the above organizations.
5 Investment Transactions
-----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the six
months ended March 31, 1997 aggregated $322,918 and $734,972, respectively.
7
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
Assisted Living -- 0.6%
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR AAA $ 1,500 Massachusetts IFA
(Briscoe House)
(FHA), 7.125%,
2/1/36 $ 1,572,825
- ---------------------------------------------------------------------------
$ 1,572,825
- ---------------------------------------------------------------------------
Education -- 4.0%
- ---------------------------------------------------------------------------
Aa1 AA+ $ 1,625 Massachusetts
Health and
Educational
Facilities
Authority (HEFA)
(Amherst
College), 6.80%,
11/1/21 $ 1,741,984
A1 A+ 2,500 Massachusetts
HEFA (Boston
College), 5.25%,
6/1/18 2,320,475
NR BBB- 3,600 Massachusetts
HEFA (Merrimack
College), 7.125%,
7/1/12 3,845,016
A1 A+ 250 Massachusetts
HEFA (Tufts
University),
7.75%, 8/1/13 265,545
A1 NR 2,000 New England
Educational Loan
Marketing Corp.,
(AMT), 6.90%,
11/1/09 2,154,520
- ---------------------------------------------------------------------------
$10,327,540
- ---------------------------------------------------------------------------
Electric Utilities -- 6.2%
- ---------------------------------------------------------------------------
NR BBB $ 3,985 Guam Power
Authority, 5.25%,
10/1/23 $ 3,442,323
Baa2 BBB+ 3,500 Massachusetts
Municipal
Wholesale
Electric Co.,
6.75%, 7/1/11 3,710,035
Baa2 BBB+ 5,060 Massachusetts
Municipal
Wholesale
Electric Co.,
6.625%, 7/1/18 5,280,818
Baa1 BBB+ 11,175 Puerto Rico
Electric Power
Authority, 0%,
7/1/17 3,422,344
- ---------------------------------------------------------------------------
$15,855,520
- ---------------------------------------------------------------------------
Escrowed / Prerefunded -- 0.8%
- ---------------------------------------------------------------------------
NR AAA $11,295 Massachusetts
General
Obligations
Federal Assisted
Housing, Section
8, 0%, 2/1/23 $ 2,037,844
- ---------------------------------------------------------------------------
$ 2,037,844
- ---------------------------------------------------------------------------
General Obligations -- 6.4%
- ---------------------------------------------------------------------------
Baa1 A- $ 1,000 City of Lowell,
6.375%, 8/15/01 $ 1,045,350
A1 A+ 3,400 Commonwealth of
Massachusetts,
5.00%, 1/1/12 3,172,438
Baa1 A 2,000 Commonwealth of Puerto
Rico Aqueduct and
Sewer Authority,
5.00%, 7/1/19 1,777,260
NR BBB 2,145 Government of Guam,
5.40%, 11/15/18 1,924,365
A1 A+ 3,015 Massachusetts Bay
Transit Authority
(MBTA), 5.50%, 3/1/21 2,841,065
A1 A+ 1,000 Massachusetts Bay
Transit Authority
(MBTA), 5.90%, 3/1/12 1,019,020
A NR 1,700 Town of Nantucket,
6.80%, 12/1/11 1,846,506
A1 A+ 250 University of
Massachusetts Building
Authority, 7.20%,
5/1/04 284,183
NR NR 2,350 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 2,540,421
- ---------------------------------------------------------------------------
$16,450,608
- ---------------------------------------------------------------------------
Hospitals -- 13.8%
- ---------------------------------------------------------------------------
A2 A $3,000 Massachusetts HEFA
(Charlton Memorial
Hospital), 7.25%,
7/1/13 $3,243,270
Aa2 AA 2,000 Massachusetts HEFA
(Daughters of Charity
Health System), 6.10%,
7/1/14 2,042,980
NR A- 1,020 Massachusetts HEFA
(Jordan Hospital),
6.875%, 10/1/15 1,071,704
NR A- 2,870 Massachusetts HEFA
(Jordan Hospital),
6.875%, 10/1/22 3,033,188
Baa3 BB 5,500 Massachusetts HEFA
(Milford-Whitinsville
Hospital), 7.75%,
7/15/17 5,761,800
Baa1 BBB+ 2,000 Massachusetts HEFA
(New England Baptist
Hospital), 7.35%,
7/1/17 2,103,160
NR BBB- 2,600 Massachusetts HEFA
(North Adams
Hospital), 6.625%,
7/1/18 2,590,250
Baa2 BBB 5,025 Massachusetts HEFA
(Sisters of Providence
Health System), 6.50%,
11/15/08 5,120,224
Baa2 BBB 2,085 Massachusetts HEFA
(Sisters of Providence
Health System),
6.625%, 11/15/22 2,069,050
A1 A+ 530 Massachusetts HEFA
(Spaulding
Rehabilitation
Hospital), 7.625%,
7/1/21 557,390
</TABLE>
See notes to financial statements
8
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- --------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Hospitals (continued)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR AA $ 1,475 Massachusetts HEFA, (FHA),
(Deutsches Altenheim), 7.70%,
11/1/31 $ 1,584,607
NR NR 9,000 Massachusetts IFA (Biomedical
Research Corp.), 0%, 8/1/09 4,393,350
NR AAA 1,950 Massachusetts IFA (Heights
Crossing) (AMT), 6.15%, 2/1/35 1,935,629
- --------------------------------------------------------------------------------
$ 35,506,602
- --------------------------------------------------------------------------------
Housing -- 14.9%
- --------------------------------------------------------------------------------
NR AAA $ 2,750 Framingham Housing Authority,
(GNMA), 6.65%, 2/20/32 $ 2,833,160
A1 A+ 5,000 Massachusetts HFA, 6.375%,
4/1/21 5,124,150
Aa A+ 5,500 Massachusetts HFA (AMT), 6.60%,
12/1/24 5,650,975
Aa A+ 7,195 Massachusetts HFA, (AMT),
6.60%, 12/1/26 7,385,379
Aa A+ 6,365 Massachusetts HFA, (AMT),
6.60%, 12/1/26 6,533,418
Aa A+ 2,795 Massachusetts HFA, (AMT),
7.125%, 6/1/25 2,952,694
Aa A+ 2,195 Massachusetts HFA, (AMT),
8.10%, 6/1/20 2,276,215
Aa A+ 1,500 Massachusetts HFA, (AMT),
8.10%, 12/1/21 1,545,210
Aaa AAA 1,000 Massachusetts HFA, (FNMA),
6.875%, 11/15/11 1,067,850
Aaa AAA 2,750 Massachusetts HFA, (FNMA),
6.90%, 11/15/21 2,912,718
- --------------------------------------------------------------------------------
$ 38,281,769
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution Control
Revenue -- 5.3%
- --------------------------------------------------------------------------------
A3 NR $ 5,090 Massachusetts IFA (Babson
College), 5.25%, 10/1/27 $ 4,621,109
NR NR 2,075 Massachusetts IFA (Hingham
Water Co.) (AMT), 6.60%,
12/1/15 2,130,216
NR NR 3,000 Massachusetts IFA (Hingham
Water Co.) (AMT), 6.90%,
12/1/29 3,136,260
Baa3 BB+ 3,750 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 3,822,075
- --------------------------------------------------------------------------------
$ 13,709,660
- --------------------------------------------------------------------------------
Insured Education -- 1.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Massachusetts Educational
Finance Authority, (AMBAC),
(AMT), 7.30%, 1/1/12 $ 2,145,260
Aaa AAA 300 Massachusetts Educational
Finance Authority, (MBIA),
(AMT), 7.25%, 1/1/09 316,437
Aaa AAA 400 Massachusetts HEFA (Boston
University) "RIBS", (MBIA),
Variable, 10/1/31/(1)/ 446,500
Aaa AAA 250 Massachusetts HEFA
(Northeastern University)
(AMBAC), 7.50%, 10/1/08 265,345
- --------------------------------------------------------------------------------
$ 3,173,542
- --------------------------------------------------------------------------------
Insured Electric Utilities -- 0.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Massachusett Municipal
Wholesale Electric Co.
(MBIA), 4.75%, 7/1/10 $ 1,820,460
- --------------------------------------------------------------------------------
$ 1,820,460
- --------------------------------------------------------------------------------
Insured General Obligations -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,795 City of Boston (FSA), 4.875%,
9/1/09 $ 1,700,350
NR AAA 1,000 Commonwealth of Puerto Rico
"RIBS", (AMBAC), Variable,
7/1/15/(1)/ 1,005,000
Aaa AAA 600 Town of Tyngsborough, (AMBAC),
6.90%, 5/15/08 663,648
- --------------------------------------------------------------------------------
$ 3,368,998
- --------------------------------------------------------------------------------
Insured Hospitals -- 7.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 300 Massachusetts HEFA (Berkshire
Health Systems) (MBIA), 7.60%,
10/1/14 $ 320,886
Aaa AAA 3,750 Massachusetts HEFA (Beth
Israel Hospital) Inverse
Floaters (AMBAC), (AMT),
Variable, 7/1/25//(1)/ 3,637,500
Aaa AAA 1,040 Massachusetts HEFA (Beverly
Hospital) (MBIA), 7.30%, 7/1/13 1,112,831
Aaa AAA 1,500 Massachusetts HEFA (Capital
Assist Program), (MBIA), 7.20%,
7/1/09 1,601,895
</TABLE>
See notes to financial statements
9
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) 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 $2,050 Massachusetts HEFA
(Fallon Healthcare
System), (FSA), 6.75%,
6/1/20/(2)/ $ 2,237,288
Aaa AAA 2,000 Massachusetts HEFA
(St. Elizabeth
Hospital Issue)
"LEVRRS", (FSA),
Variable,
8/15/21/(1)/ 2,222,500
Aaa AAA 2,600 Massachusetts HEFA
(St. Luke's Hospital)
"Yield Curve Notes",
(MBIA), Variable,
8/15/23/(1)/ 2,421,250
Aaa AAA 2,600 Massachusetts HEFA
(St. Luke's Hospital)
"Yield Curve Notes",
(MBIA), Variable,
8/15/13/(1)/ 2,512,250
Aaa AAA 3,000 Massachusetts HEFA
(The Medical Center of
Central Massachusetts)
(AMBAC), "CARS",
Variable,
6/23/22/(1)/ 3,303,750
Aaa AAA 700 Massachusetts HEFA
(University Hospital)
(MBIA), 7.25%, 7/1/19 760,424
- --------------------------------------------------------------------
$20,130,574
- --------------------------------------------------------------------
Insured Housing -- 0.8%
- --------------------------------------------------------------------
Aaa AAA $2,000 Massachusetts HFA,
(AMBAC), 6.45%,
1/1/36 $ 2,063,300
- --------------------------------------------------------------------
$ 2,063,300
- --------------------------------------------------------------------
Insured Transportation -- 2.5%
- --------------------------------------------------------------------
Aaa AAA $5,860 Massachusetts Port
Authority, (AMT),
(FGIC), 7.50%, 7/1/20 $ 6,381,599
- --------------------------------------------------------------------
$ 6,381,599
- --------------------------------------------------------------------
Insured Water and Sewer -- 1.0%
- --------------------------------------------------------------------
Aaa AAA $2,800 Massachusetts State
Water Resources
Authority (MBIA),
5.00%, 3/1/22 $ 2,454,872
- --------------------------------------------------------------------
$ 2,454,872
- --------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 3.8%
- --------------------------------------------------------------------
NR A- $7,800 Plymouth County, MA
(Plymouth County
Correctional
Facility), 7.00%,
4/1/22 $ 8,564,087
NR BBB $1,200 Puerto Rico
Industrial, Tourist,
Educational, Medical
and Enviormental
Control Authority
(Guaynabo Municipal
Government Center
Lease), 5.625%, 7/1/22 1,105,956
- --------------------------------------------------------------------
$ 9,670,043
- --------------------------------------------------------------------
Life Care -- 3.4%
- --------------------------------------------------------------------
NR AAA $2,000 Boston, MA, Industrial
Development Financing
Authority, 6.00%,
2/1/37 $ 1,962,680
NR NR 8,000 Massachusetts IFA, 0%,
8/1/08 4,184,800
NR NR 6,000 Massachusetts IFA, 0%,
8/1/10 2,734,980
- --------------------------------------------------------------------
$ 8,882,460
- --------------------------------------------------------------------
Nursing Homes -- 2.3%
- --------------------------------------------------------------------
NR NR $2,400 Massachusetts HEFA
(Fairview Care
Facilities), 10.25%,
1/1/21 $ 2,676,672
NR NR 3,225 Massachusetts IFA (AGE
Institute of
Massachusetts
Project), 8.05%,
11/1/25 3,251,897
- --------------------------------------------------------------------
$ 5,928,569
- --------------------------------------------------------------------
Solid Waste -- 0.5%
- --------------------------------------------------------------------
NR NR $1,145 City of Pittsfield,
Vicon Recovery
Associates, 7.95%,
11/1/04 $ 1,179,671
- --------------------------------------------------------------------
$ 1,179,671
- --------------------------------------------------------------------
Special Tax Revenue -- 1.6%
- --------------------------------------------------------------------
Baa1 A $1,000 Puerto Rico Highway
and Transportation
Authority, 5.00%,
7/1/36 $ 860,910
Baa1 A 3,500 Puerto Rico Highway
and Transportation
Authority, 5.50%,
7/1/36 3,273,970
- --------------------------------------------------------------------
$ 4,134,880
- --------------------------------------------------------------------
Transportation -- 10.7%
- --------------------------------------------------------------------
NR BBB $5,950 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 6,071,499
</TABLE>
See notes to financial statements
10
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
- ---------------------------------------------------------------------------
Aa AA- $ 2,000 Massachusetts Port
Authority, 6.00%,
7/1/23 $ 2,004,280
A1 A+ 21,900 Massachusetts State
Turnpike Authority,
5.00%, 1/1/20 19,434,716
- ---------------------------------------------------------------------------
$ 27,510,495
- ---------------------------------------------------------------------------
Water and Sewer -- 10.4%
- ---------------------------------------------------------------------------
Baa1 BBB $12,185 City of Boston (Harbor
Electric Energy Co.)
(AMT), 7.375%, 5/15/15 $ 13,025,764
A A 7,175 Massachusetts Water
Resources Authority,
5.00%, 3/1/22 6,257,102
A A 1,500 Massachusetts Water
Resources Authority,
5.25%, 3/1/13 1,422,390
A A 4,165 Massachusetts Water
Resources Authority,
5.25%, 12/1/15 3,939,590
NR NR 2,000 Virgin Islands Water
and Power Authority,
7.60%, 1/1/12 2,131,740
- ---------------------------------------------------------------------------
$ 26,776,586
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $245,151,275) $257,218,417
- ---------------------------------------------------------------------------
</TABLE>
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security has been segregated to cover margin requirements on open
financial futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Massachusetts
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at March 31, 1997, 15.3% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 2.4% to 5.4% of total investments.
See notes to financial statements
11
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of March 31, 1997
Assets
- ---------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A)
(identified cost basis $245,151,275) $257,218,417
Cash 453
Interest receivable 4,597,529
Receivable for variation margin on open financial
futures contracts (Note 1E) 7,813
Deferred organization expenses (Note 1D) 4,612
- ---------------------------------------------------------------------------
Total assets $261,828,824
- ---------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------
Demand note payable (Note 5) $ 54,000
Payable to affiliate for Trustees' fees (Note 4) 3,837
Accrued expenses 21,581
- ---------------------------------------------------------------------------
Total liabilities $ 79,418
- ---------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $261,749,406
- ---------------------------------------------------------------------------
Sources of Net Assets
- ---------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $249,554,392
Net unrealized appreciation of investments and
financial futures contracts (computed on basis
of identified cost) 12,195,014
- ---------------------------------------------------------------------------
Total $261,749,406
- ---------------------------------------------------------------------------
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
March 31, 1997
Investment Income
- ---------------------------------------------------------------------------
<S> <C>
Interest income $ 8,636,070
- ---------------------------------------------------------------------------
Total income $ 8,636,070
- ---------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 623,088
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 7,674
Custodian fee (Note 1J) 72,899
Legal and accounting services 29,309
Bond pricing 6,717
Amortization of organization expenses (Note 1D) 2,597
Miscellaneous 23,059
- ---------------------------------------------------------------------------
Total expenses $ 765,343
- ---------------------------------------------------------------------------
Less Allocations --
Reduction of custodian fee (Note 1J) $ 12,110
- ---------------------------------------------------------------------------
Total expense reductions $ 12,110
- ---------------------------------------------------------------------------
Net expenses $ 753,233
- ---------------------------------------------------------------------------
Net investment income $ 7,882,837
- ---------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- ---------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,632,171
Financial futures contracts (1,784,643)
- ---------------------------------------------------------------------------
Net realized gain on investments transactions $ 1,847,528
- ---------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (4,494,151)
Financial futures contracts 436,600
- ---------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ (4,057,551)
- ---------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (2,210,023)
- ---------------------------------------------------------------------------
Net increase in net assets from operations $ 5,672,814
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
12
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) March 31, 1997 Year Ended
in Net Assets (Unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 7,882,837 $ 16,966,016
Net realized gain on investments 1,847,528 3,096,278
Net change in unrealized
appreciation (depreciation) (4,057,551) (1,167,330)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 5,672,814 $ 18,894,964
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 6,620,762 $ 16,336,133
Withdrawals (31,673,406) (56,272,108)
- --------------------------------------------------------------------------------
Net decrease in net assets resulting
from capital transactions $ (25,052,644) $(39,935,975)
- --------------------------------------------------------------------------------
Total decrease in net assets $ (19,379,830) $(21,041,011)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 281,129,236 $302,170,247
- --------------------------------------------------------------------------------
At end of period $ 261,749,406 $281,129,236
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1997 ---------------------------------------------------------
(Unaudited) 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.56%+ 0.55% 0.56% 0.51% 0.49%+
Net expenses, after custodian fee reduction 0.55%+ 0.54% 0.53% -- --
Net investment income 5.76%+ 5.77% 6.00% 5.74% 5.72%+
Portfolio Turnover 22% 51% 87% 53% 38%
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $261,749 $281,129 $302,170 $308,540 $290,613
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, February 1, 1993, to
September 30, 1993.
/(1)/ The expense ratios for the year ended September 30, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
14
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
------------------------------------------------------------------------------
Massachusetts Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a non-diversified open-end management
investment company which was organized as a trust under the laws of the State
of New York on May 1, 1992. The Declaration of Trust permits the Trustees to
issue interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuations -- Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts and options on
futures contracts listed on commodity exchanges are valued at closing
settlement prices. Options on futures contracts which are traded over the
counter are valued at the mean between the latest bid and asked prices. Short-
term obligations, maturing in sixty days or less, are valued at amortized
cost, which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair market value using methods
determined in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for Federal
income tax purposes.
C Income Taxes -- The Portfolio has elected to be treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for Federal or
state taxes on any taxable income of the Portfolio because each investor in
the Portfolio is ultimately responsible for the payment of any taxes. Since
some of the Portfolio's investors are regulated investment companies that
invest all or substantially all of their assets in the Portfolio, the
Portfolio normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in order for
its investors to satisfy them. The Portfolio will allocate, at least annually
among its investors, each investor's distributive share of the Portfolio's net
taxable (if any) and tax-exempt investment income, net realized capital gains,
and any other items of income, gain, loss, deduction or credit.
D Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F Options on Financial Futures Contracts -- Upon the purchase of a put option
on a financial futures contract by the Portfolio, the premium paid is recorded
as an investment, the value of which is marked-to-market daily. When a
purchased option expires, the Portfolio will realize a loss in the amount of
the cost of the option. When the Portfolio enters into a closing 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 the 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 Portfolio may engage in
when-issued and delayed delivery transactions. The Portfolio records when-
issued securities on trade date and maintains security positions such that
sufficient liquid assets will be available to make payments for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked-to-market daily and begin earning interest on settlement date.
H Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
I Other -- Investment transactions are accounted for on a trade date basis.
15
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
J Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by the credits which are determined based on the average daily
cash balances the Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolio's custodian fees are reflected as a
reduction of operating expense on the statement of operations.
K Interim Financial Information -- The interim financial statements relating
to March 31, 1997 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the
Portfolio's management reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
2 Investment Adviser Fee and Other Transactions with Affiliates
------------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets plus a percentage of
gross income (i.e., income other than gains from the sale of securities). For
the six months ended March 31, 1997, the fee was equivalent to 0.46%
(annualized) of the Portfolio's average net and amounted to $623,088. Except
as to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser fee.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
six months ended March 31, 1997, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations.
3 Investments
------------------------------------------------------------------------------
For the six months ended March 31, 1997, purchases and sales of investments,
other than U.S. Government securities, purchased option transactions, and
short-term obligations, aggregated $58,728,219 and $76,402,194, respectively.
4 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned by the Portfolio at March 31, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
Aggregate cost $245,151,275
------------------------------------------------------------------------------
Gross unrealized appreciation $ 13,054,978
Gross unrealized depreciation (987,836)
------------------------------------------------------------------------------
Net unrealized appreciation $ 12,067,142
------------------------------------------------------------------------------
</TABLE>
5 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank.
Borrowings will be made by the Portfolio solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to the Portfolio 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
quarter. At March 31, 1997, the Portfolio had a balance outstanding pursuant
to this line of credit of $54,000. The Portfolio did not have any significant
borrowings or allocated fees during the six months ended March 31, 1997.
16
<PAGE>
Massachusetts Municipals Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
6 Financial Instruments
------------------------------------------------------------------------------
The Portfolio regularly trades 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 the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at March 31, 1997,
were as follows:
<TABLE>
<CAPTION>
Futures
Contracts
Expiration Net Unrealized
Date Contracts Position Appreciation
------------------------------------------------------------------------------
<S> <C> <C> <C>
6/97 50 U.S. Treasury Bonds Short $127,872
------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Massachusetts Municipal Bond Portfolio as of March 31, 1997
INVESTMENT MANAGEMENT
Massachusetts Municipal Bond Portfolio
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Massachusetts Municipals Portfolio
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
18
<PAGE>
Portfolio Investment Adviser
Boston Management and Research
24 Federal Street
Boston, MA 02110
Fund Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance Municipals Trust
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
MMBSRC-5/97
