<PAGE>
[LOGO OF EATON [PHOTO OF BRICK WALL AND EDUCATION
VANCE APPEARS HERE] SIGN APPEARS HERE]
Semiannual Report March 31, 1997
EV
MARATHON
NATIONAL
[PHOTO OF HIGHWAY
APPEARS HERE] MUNICIPALS
FUND
Eaton Vance
Global Management-Global Distribution
[PHOTO OF BRIDGE APPEARS HERE]
Marathon
<PAGE>
EV Marathon National Municipals Fund as of March 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
- -----------
[PHOTO OMITTED]
- -----------
Thomas M. Metzold,
Portfolio Manager
Investment Environment
- --------------------------------------------------------------------------------
The Economy
. The U.S. economy in the second half of 1996 was favorable for the bond
markets, as continued moderate growth and low inflation combined with a
reduced federal budget deficit. Against this back-drop, bond yields finished
the year lower than at mid-year.
. The first quarter of 1997 has been marked by stronger-than-expected economic
growth, a tightening labor market, and increasing uneasiness over inflation,
which remains low. First quarter Gross Domestic Product (GDP) grew at a
remarkably fast annual rate of 5.6%, the strongest quarterly growth in over a
decade.
. Consumer spending surged 6.4% in the first quarter of 1997, aided by rising
employment and a milder-than-normal winter in some parts of the nation.
Consumer spending had increased by 3.4% in the final quarter of 1996.
The Bond Market
. At its March 25 meeting, the Federal Reserve raised the Federal Funds Target
Rate 0.25% in an effort to slow the economy and make a preemptory strike at
inflation.
. In response to 1997's economic events and the increase in short-term interest
rates, the bond market has sold off somewhat. The yield on the 30-year
Treasury Bond - a widely held gauge of bond market sentiment - rose to 7.08%
on March 31 from 6.64% at the end of 1996. Despite a subsequent rally in bond
prices since March 31, investors remain concerned about further rate hikes by
the Federal Reserve.
. During the past six months, the municipal bond market has outperformed the
Treasury market. As discussion of the flat-tax faded from the political
agenda in 1996, investors focused on the excellent values that tax-exempt
bonds represent.
The Fund
- --------------------------------------------------------------------------------
The Past Six Months
. During the six months ended March 31, 1997, the Fund had a total return of
2.2%./1/
. This return resulted from a decrease in net asset value per share to $9.84 on
March 31, 1997 from $9.90 on September 30, 1996, and the reinvestment of
$0.276 per share in tax-free income dividends./2/
. 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 5.64%.
. To equal 5.64% in a taxable investment, a couple in the 36% combined federal
and state tax bracket would need a yield of 8.81%.
Management Discussion
. The Fund has benefited from investments in a wide range of projects and
special situations, producing higher-than-average yields while maintaining
strong underlying fundamentals. In a difficult interest rate environment,
these bonds generally held their values well while continuing to pay high
tax-exempt income.
. Unlike the broader market, which is typically sensitive to interest rate
movements, this Fund's holdings tend to be more credit-driven. As a result,
their performance is more dependent on the fundamentals and financial
strength of the underlying projects that secure the bonds.
. The Fund remains well-diversified, with strength in the industrial
development, health care, and transportation sectors.
- --------------------------------------------------------------------------------
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/ This return does not include the maximum 5% applicable contingent deferred
sales charge (CDSC).
/2/ A portion of the Fund's income could be subject to federal income tax and/
or alternative minimum tax.
/3/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC average annual returns
reflect applicable CDSC on the following schedule: 5%-1st and 2nd years;
4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th year. 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.
/4/ Based on market value as of 3/31/97. May not represent the Portfolio's
current or future investments.
- --------------------------------------------------------------------------------
Fund Information
as of March 31, 1997
<TABLE>
<CAPTION>
Performance/3/ 5 Largest Sectors/4/ Portfolio Overview/4/
- ------------------------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
By total investments Number of Issues 237
Average Annual Total Returns (at net asset value)
- ------------------------------------------------- Industrial revenue/pollution control 17.1% Average Maturity 24.8 Yrs.
One Year 5.9%
Ten Years 6.5 Escrowed 12.3% Effective Maturity 13.4 Yrs.
SEC Average Annual Total Returns (including maximum Hospitals 10.6% Average Rating A-
- ---------------------------------------------------
applicable CDSC) Nursing Homes 7.7% Average Call 10.1 Yrs.
- ----------------
One Year 0.9% Transportation 6.7% Average Dollar Price $91.45
Ten Years 6.5
</TABLE>
2
<PAGE>
EV Marathon National Municipals Fund 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 National Municipals Portfolio, at value (Note 1A)
(identified cost, $1,849,855,072) $ 1,996,973,611
Receivable for Fund shares sold 1,137,500
- -------------------------------------------------------------------------------------------
Total assets $ 1,998,111,111
- -------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------
Dividends payable $ 4,312,905
Payable for Fund shares redeemed 2,863,334
Accrued expenses 1,387,749
- -------------------------------------------------------------------------------------------
Total liabilities $ 8,563,988
- -------------------------------------------------------------------------------------------
Net Assets for 202,222,648 shares of
beneficial interest outstanding $ 1,989,547,123
- -------------------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------------------
Paid-in capital $ 1,937,423,944
Accumulated undistributed net realized loss on investment
transactions (computed on the basis of identified cost) (97,028,532)
Accumulated undistributed net investment income 2,033,172
Unrealized appreciation of investments (computed on the
basis of identified cost) 147,118,539
- -------------------------------------------------------------------------------------------
Total $ 1,989,547,123
- -------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- -------------------------------------------------------------------------------------------
($1,989,547,123 / 202,222,648 shares of
beneficial interest outstanding) $ 9.84
- -------------------------------------------------------------------------------------------
</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 $ 73,456,953
Expenses allocated from Portfolio (5,552,331)
- -------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 67,904,622
- -------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 1,591
Distribution fees (Note 5) 10,227,398
Transfer and dividend disbursing agent fees 649,388
Printing and postage 200,311
Registration fees 27,413
Custodian fee 12,000
Legal and accounting services 10,875
Miscellaneous 71,947
- -------------------------------------------------------------------------------------------
Total expenses $ 11,200,923
- -------------------------------------------------------------------------------------------
Net investment income $ 56,703,699
- -------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- -------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 14,380,163
Financial futures contracts (17,961,983)
- -------------------------------------------------------------------------------------------
Net realized loss on investment transactions $ (3,581,820)
- -------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ (12,486,056)
Financial futures contracts 5,412,395
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ (7,073,661)
- -------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (10,655,481)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 46,048,218
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
3
<PAGE>
EV Marathon National Municipals Fund 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 $ 56,703,699 $ 121,825,796
Net realized gain (loss)
on investments (3,581,820) 1,458,622
Net change in unrealized
appreciation
(depreciation)
of investments (7,073,661) 20,708,208
- ----------------------------------------------------------------------------------------------
Net increase in net assets
from operations $ 46,048,218 $ 143,992,626
- ----------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (57,293,844) $ (121,100,027)
- ----------------------------------------------------------------------------------------------
Total distributions to shareholders $ (57,293,844) $ (121,100,027)
- ----------------------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares $ 114,033,395 $ 395,101,590
Net asset value of shares
issued to shareholders
in payment of
distributions declared 21,142,474 46,400,860
Cost of shares redeemed (236,014,730) (554,003,400)
- ----------------------------------------------------------------------------------------------
Net decrease in net assets from
Fund share transactions $ (100,838,861) $ (112,500,950)
- ----------------------------------------------------------------------------------------------
Net decrease in net assets $ (112,084,487) $ (89,608,351)
- ----------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------
At beginning of period $ 2,101,631,610 $ 2,191,239,961
- ----------------------------------------------------------------------------------------------
At end of period $ 1,989,547,123 $ 2,101,631,610
- ----------------------------------------------------------------------------------------------
Accumulated undistributed net
investment income included in net
assets
- ----------------------------------------------------------------------------------------------
At end of period $ 2,033,172 $ 2,623,317
- ----------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
4
<PAGE>
EV Marathon National Municipals Fund 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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value -- Beginning of period $ 9.900 $ 9.800 $ 9.410
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.274 $ 0.557 $ 0.570
Net realized and unrealized gain (loss) on investments (0.058) 0.096 0.395
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.216 $ 0.653 $ 0.965
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.276) $ (0.553) $ (0.570)
In excess of net investment income -- -- (0.005)
In excess of net realized gain on investments -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.276) $ (0.553) $ (0.575)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 9.840 $ 9.900 $ 9.800
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 2.16% 6.84% 10.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,989,547 $2,101,632 $2,191,240
Ratio of net expenses to average net assets /(2)(3)/ 1.62%+ 1.55% 1.53%
Ratio of net expenses to average net assets after custodian fee reduction /(2)/ 1.62%+ 1.54% 1.52%
Ratio of net investment income to average net assets 5.49%+ 5.62% 6.00%
Portfolio Turnover /(4)/ -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value -- Beginning of period $ 10.570 $ 9.820 $ 9.430
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.556 $ 0.553 $ 0.568
Net realized and unrealized gain (loss) on investments (1.043) 0.856 0.490
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ (0.487) $ 1.409 $ 1.058
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.556) $ (0.553) $ (0.568)
In excess of net investment income (0.077) (0.106) (0.100)
In excess of net realized gain on investments (0.040) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.673) $ (0.659) $ (0.668)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 9.410 $ 10.570 $ 9.820
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ (4.82)% 14.90% 11.67%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,171,901 $2,090,482 $1,491,904
Ratio of net expenses to average net assets /(2)(3)/ 1.51% 1.67% 1.79%
Ratio of net expenses to average net assets after custodian fee reduction /(2)/ -- -- --
Ratio of net investment income to average net assets 5.54% 5.43% 5.88%
Portfolio Turnover /(4)/ -- 10% 54%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
/(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.
/(4)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred
substantially all of its investable assets to the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
5
<PAGE>
EV Marathon National Municipals Fund as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
1 Significant Accounting Policies
---------------------------------------------------------------------------
EV Marathon National Municipals Fund (the Fund) is a 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 National 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 (94.8% 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 $93,534,883 which will reduce the taxable income arising
from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax. Such
capital loss carryover will expire on September 30, 2003 ($8,244,733) and
September 30, 2004 ($85,290,150). Additionally, at September 30, 1996, net
capital losses of $5,556,597 attributable to security transactions incurred
after October 31, 1995, are treated as arising on the first day of the
Fund's current taxable year. Dividends paid by the Fund from net tax-exempt
interest on municipal bonds allocated from the Portfolio are not includable
by shareholders as gross income for federal income tax purposes because the
Fund and Portfolio intend to meet certain requirements of the Internal
Revenue Code applicable to regulated investment companies which will enable
the Fund to pay exempt-interest dividends. The portion of such interest, if
any, earned on private activity bonds issued after August 7, 1986, may be
considered a tax preference item to shareholders.
D 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.
E Other -- Investment transactions are accounted for on a trade-date basis.
F 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 the Fund's custodian fees are reported as a reduction of expenses on
the statement of operations.
G 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 Fund's management reflect all adjustments consisting only 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.
6
<PAGE>
EV Marathon National Municipals Fund as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
Distributions of allocated realized gains, if any, are made at least
annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares or, at the
election of the shareholder, in cash. The Fund distinguishes between
distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of
tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of
income between the financial statements and tax earnings and profits which
result in 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.
3 Shares of Beneficial Interest
---------------------------------------------------------------------------
The Fund's 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 11,410,868 39,934,229
Issued to shareholders electing to
receive payments of distributions
in Fund shares 2,114,355 4,686,466
Redemptions (23,610,185) (55,965,893)
------------------------------------------------------------------------------------
Net decrease (10,084,962) (11,345,198)
------------------------------------------------------------------------------------
</TABLE>
4 Investment Adviser Fee and Other 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. Except as to Trustees of the Fund
and the Portfolio who are not members of EVM's of 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 of the Portfolio are officers and/or
directors/trustees of the above organizations.
5 Distribution Plan
---------------------------------------------------------------------------
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan requires the Fund
to pay the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD)
amounts equal to 1/365 of 0.75% of each Fund's daily net assets, for
providing ongoing distribution services and facilities to the Fund. The
Fund will automatically discontinue payments to EVD during any period in
which there are no outstanding Uncovered Distribution Charges, which are
equivalent to the sum of (i) 5% of the aggregate amount received by the
Fund for shares sold plus, (ii) distribution fees calculated by applying
the rate of 1% over the prevailing prime rate to the outstanding balance of
Uncovered Distribution Charges of EVD reduced by the aggregate amount of
contingent deferred sales charges (see Note 6) and daily amounts
theretofore paid to EVD. The amount payable to EVD with respect to each day
is accrued on such day as a liability of the Fund and, accordingly, reduces
the Fund's net assets. The Fund paid $7,753,143, to EVD representing 0.75%
(annualized) of average daily net assets. At March 31, 1997 the amount of
Uncovered Distribution Charges of EVD calculated under the Plan for the
Fund was approximately $28,948,000.
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal
year. The Trustees have initially implemented the Plan by authorizing the
Fund to make quarterly payments of service fees to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed 0.25%
per annum of the Fund's average daily net assets based on the value of Fund
shares sold by such persons and remaining outstanding for at least one
year. The Fund paid or accrued service fees to or payable to EVD for the
six months ended March 31, 1997 in the amount of $2,474,255. Service fee
payments are made for personal services and/or the maintenance of
shareholder accounts. Service fees paid to EVD and Authorized Firms are
separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such, are not subject to automatic
discontinuance when there are no outstanding Uncovered Distribution Charges
of EVD.
Certain officers and Trustees of the Fund are officers or directors of EVD.
7
<PAGE>
EV Marathon National Municipals Fund as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
6 Contingent Deferred Sales Charge
---------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Fund shares made within six years of purchase. Generally, the CDSC is based
upon the lower of the net asset value at date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of
dividends or capital gains distributions. The CDSC is imposed at declining
rates that begin at 5% in the case of redemptions in the first and second
year after purchase, declining one percentage point each subsequent year.
No CDSC is levied on shares which have been sold to EVD or its affiliates
or to their respective employees. CDSC charges are paid to EVD to reduce
the amount of Uncovered Distribution Charges calculated under the Fund's
Distribution Plan (See Note 5). CDSC charges received when no Uncovered
Distribution Charges exist will be credited to the Fund. EVD received
approximately $2,280,000 of CDSC paid by shareholders for the period ended
March 31, 1997.
7 Investment Transactions
---------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the National Municipals
Portfolio aggregated $118,548,061 and $288,805,110, respectively, for the
six months ended March 31, 1997.
8
<PAGE>
National 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 -- 5.9%
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 6,035 Arizona Health
Facilities Authority,
Mesa Project, 7.625%,
1/1/26 $ 5,663,365
NR NR 17,070 Bell County, TX,
Health Facilities,
(Care Institute Inc.),
9.00%, 11/1/24 18,529,144
NR NR 5,000 Chester County, PA,
Industrial Development
Board (Senior Life
Choice of Paoli,
L.P.), 8.05%, 1/1/24 5,077,150
NR NR 3,060 Chester County, PA,
Kimberton Project
(AMT), 8.50%, 9/1/25 3,213,245
NR NR 12,555 Dekalb Private
Hospital, GA
(GF/Atlanta), 8.50%,
3/1/25 12,975,467
NR NR 5,000 Delaware County, PA,
Glen Riddle Project
(AMT), 8.625%, 9/1/25 5,245,800
NR NR 4,215 Florence, KY, Housing
Facilities (Blue Grass
RHF Housing, Inc.),
9.50%, 7/1/17 4,239,152
NR NR 15,000 Illinois Development
Finance Authority
(Care Institute,
Inc.), 7.80%, 6/1/25 14,619,450
NR NR 15,000 Louisiana Housing
Finance Agency (HCC
Assisted Living Group)
(AMT), 9.00%, 3/1/25 15,797,550
NR NR 4,605 New Jersey Economic
Development Authority
(Chelsea at East
Brunswick Project)
(AMT), 8.25%, 10/1/20 4,568,252
NR NR 10,000 New Jersey Economic
Development Authority,
Forsgate Project,
(AMT), 8.625%, 6/1/25 10,484,100
NR NR 7,915 Roseville, MN, Elder
Care Facility (Care
Institute, Inc.),
7.75%, 11/1/23 7,999,374
NR NR 12,430 St. Paul, MN, Housing
and Redevelopment
(Care Institute,
Inc.), Highland Park,
8.75%, 11/1/24 13,385,121
NR NR $ 5,000 Village of North
Syracuse, NY, Housing
Authority (AJM Senior
Housing, Inc., Janus
Park), 8.00%, 6/1/24 $ 4,973,350
- --------------------------------------------------------------------------
$ 126,770,520
- --------------------------------------------------------------------------
Cogeneration -- 5.1%
- --------------------------------------------------------------------------
NR NR $ 20,250 Maryland Energy, AES
Warrior Run Project
(AMT), 7.40%, 9/1/19 $ 21,243,263
NR A+ 30,775 New Jersey Economic
Development Authority,
Vineland Cogeneration
Limited Partnership
Project (AMT), 7.875%,
6/1/19 33,068,968
NR NR 9,950 Palm Beach County,
Solid Waste Industrial
Development Revenue
(Osceola Power) (AMT),
6.95%, 1/1/22 8,319,792
NR NR 18,450 Pennsylvania Economic
Development Authority,
Northampton Generating
Project (AMT), 6.60%,
1/1/19 18,200,372
NR NR 5,000 Pennsylvania Economic
Development Authority,
Northampton Generating
Project, Junior Liens
(AMT), 6.95%, 1/1/21 4,890,750
NR NR 7,000 Pennsylvania Economic
Development Authority,
Northampton Generating
Project, Junior Liens,
(AMT), 6.875%, 1/1/11 6,849,500
NR NR 6,100 Pennsylvania Economic
Development Authority,
Northampton Generation
Project, (AMT), 6.50%,
1/1/13 5,986,784
NR NR 10,000 Pennsylvannia Economic
Development Authority,
Colver Project, (AMT),
8.05%, 12/1/15 10,649,100
- --------------------------------------------------------------------------
$ 109,208,529
- --------------------------------------------------------------------------
Colleges and Universities -- 0.4%
- --------------------------------------------------------------------------
NR BBB- $ 3,000 Massachusetts Health
and Educational
Facilities (Nichols
College), 7.00%,
10/1/20 $ 3,145,560
</TABLE>
See notes to financial statements
9
<PAGE>
National 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
- --------------------------------------------------------------------------
Colleges and Universities (continued)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 4,360 New Hampshire Higher
Educational and Health
(Franklin Pierce Law
Center), 7.50%, 7/1/22 $ 4,421,127
- --------------------------------------------------------------------------
$ 7,566,687
- --------------------------------------------------------------------------
Electric Utilities -- 0.3%
- --------------------------------------------------------------------------
NR NR $ 5,000 West Feliciana, LA,
Gulf States Utilities
Company Project,
(AMT), 9.00%, 5/1/15 $ 5,535,000
- --------------------------------------------------------------------------
$ 5,535,000
- --------------------------------------------------------------------------
Escrowed / Prerefunded -- 12.3%
- --------------------------------------------------------------------------
NR AAA $ 65,000 Bakersfield, CA,
Bakersfield Assisted
Living Center, 0%,
4/15/21 $ 12,376,650
NR NR 2,200 Bexar County, TX,
Health Facilities (St.
Luke's Lutheran),
7.00%, 5/1/21 2,560,140
NR AAA 27,870 Colorado Health
Facilities Authority,
Retirement Housing,
Liberty Heights
Project, 0%, 7/15/20 5,464,192
Aaa NR 29,600 Colorado Health
Facilities Authority,
Retirement Housing,
Liberty Heights
Project, 0%, 7/15/22 5,045,616
Aa NR 5,000 Colorado Housing
Finance Authority,
Retirement Housing,
Liberty Heights
Project, 7.55%, 11/1/27 5,510,450
Aaa NR 225,500 Dawson Ridge
Metropolitan District
Number 1, Douglas
County, CO, 0%, 10/1/22 40,479,504
Baa AAA 10,000 Detroit, MI, Unlimited
Tax, 8.70%, 4/1/10 11,311,600
Baa AAA 3,500 Detroit, MI, Unlimited
Tax, Series 1991,
8.00%, 4/1/11 3,972,815
NR NR 7,000 Florida Mid-Bay Bridge
Authority, 6.875%,
10/1/22 8,090,390
NR AAA 186,555 Illinois Development
Finance Authority,
Regency Park at
Lincolnwood, 0%,
7/15/23 29,651,052
NR AAA 30,360 Illinois Development
Finance Authority,
Regency Park at
Lincolnwood, 0%,
7/15/25 4,161,142
NR NR 4,500 Illinois, Chicago
Osteopathic Health
Systems, 7.25%, 5/15/22 5,337,630
NR NR 4,650 Illinois, Chicago
Osteopathic Heath
Systems, 7.125%,
5/15/11 5,298,629
NR AAA 4,000 Jackson County, OK
(Jackson County
Memorial Hospital),
9.00%, 8/1/15 4,147,200
NR AAA 12,750 Louisiana Public
Facilities Authority
(Southern Baptist
Hospitals, Inc.),
8.00%, 5/15/12 14,978,573
Aaa NR 138,000 Mississippi Housing
Finance Corp., Single
Family (AMT), 0%,
6/1/15 47,986,739
Ba1 AAA 3,090 Montgomery County, PA
(United Hospitals,
Inc.), 7.50%, 11/1/13 3,318,598
Ba1 AAA 2,000 Montgomery County, PA
(United Hospitals,
Inc.), 7.50%, 11/1/14 2,147,960
Ba1 AAA 3,465 Montgomery County, PA
(United Hospitals,
Inc.), 7.50%, 11/1/15 3,721,341
Aaa NR 6,130 North Salt Lake
Municipal Building
Authority, Davis
County, UT., 8.625%,
12/1/17 7,316,032
NR AAA 4,000 Philadelphia, PA
Municipal Water
Finance Authority,
7.00%, 8/1/18 4,352,480
NR NR 3,465 Scottsdale, AZ,
Industrial Development
Authority (Westminster
Village, Inc.),
10.00%, 6/1/07 3,602,768
Aaa AAA 19,165 Texas Turnpike
Authority (Houston
Ship Channel Bridge),
12.625%, 1/1/20/(1)/ 26,287,864
NR AAA 5,120 Vermont Education and
Health Buildings
Financing Agency,
Northwestern Medical
Center Project, 9.75%,
9/1/18 5,614,541
- --------------------------------------------------------------------------
$ 262,733,906
- --------------------------------------------------------------------------
Hospitals -- 10.6%
- --------------------------------------------------------------------------
NR BBB $ 7,000 Arizona Health
Facilities, Phoenix
Memorial, 8.20%, 6/1/21 $ 7,548,520
</TABLE>
See notes to financial statements
10
<PAGE>
National 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>
Hospitals (continued)
- ---------------------------------------------------------------------------
NR NR $ 2,425 Berlin, MD (Atlantic
General), 8.375%,
6/1/22 $ 2,500,975
Baa NR 10,180 Chaves County, NM
(Eastern New Mexico
Medical Center),
7.25%, 12/1/22 10,706,001
NR BBB- 3,000 Colorado Health
Facilities (National
Jewish Center For
Immunology and
Respiratory Medicine),
6.875%, 2/15/12 3,042,210
NR BBB- 5,015 Colorado Health
Facilities (National
Jewish Center For
Immunology and
Respiratory Medicine),
7.10%, 2/15/22 5,078,139
Baa BBB 32,000 Colorado Health
Facilities (Rocky
Mountain Adventist
Healthcare), 6.625%,
2/1/22 32,681,279
NR AAA 177,055 Colorado Health
Facilities Authority,
Retirement Housing,
Liberty Heights
Project, 0%, 7/15/24 26,239,551
Baa1 NR 4,000 Crossville, TN, Health
and Educational
Financing Authority
(Cumberland Medical
Center), 6.75%, 11/1/12 4,100,400
NR BBB+ 250 Denison, TX, Hospital
Authority (Texoma
Medical Center),
6.125%, 8/15/17/(2)/ 244,995
NR BBB+ 2,500 Denison, TX, Hospital
Authority (Texoma
Medical Center),
6.125%, 8/15/27/(2)/ 2,424,450
Baa1 BBB+ 6,000 District of Columbia
(Washington Hospital
Center Issue-Medlantic
Healthcare Group,
Inc.), 7.125%, 8/15/19 6,284,160
NR A- 5,000 Dubuque, IA, Finley
Hospital Project,
6.875%, 1/1/12 5,305,650
NR BBB- 5,545 Grove City Area
Hospital Authority, PA
(United Community
Hospital), 8.125%,
7/1/12 5,632,833
NR BBB- 4,000 Hawaii Department of
Budget and Finance,
Special Purpose
Mortgage Revenue
(Wahiawa General
Hospital), 7.50%,
7/1/12 4,239,600
NR NR 4,620 Health Services
Authority of Hazelton,
Luzerne County, PA
(Hazleton-Saint Joseph
Medical Center),
8.375%, 7/1/12 5,449,198
Baa1 NR 1,000 Illinois Health
Facilities Authority
(Holy Cross Hospital),
6.70%, 3/1/14 1,027,930
Baa1 NR 2,650 Illinois Health
Facilities Authority
(Holy Cross Hospital),
6.75%, 3/1/24 2,723,856
Baa2 NR 4,500 Indiana Health
Facility Financing
Authority (Memorial
Hospital and Health
Care Center), 7.40%,
3/1/22 4,749,255
A3 BBB+ 3,750 Louisiana Public
Facilities Authority
(Woman's Hospital
Foundation), 7.25%,
10/1/22 3,990,713
NR BBB 8,250 Louisiana Public
Finance Authority,
General Health Systems
Project, 6.80%, 11/1/16 8,351,558
Baa BBB- 10,000 Maricopa County, AZ
(Sun Health
Corporation), 8.125%,
4/1/12 10,952,000
Baa NR 2,000 Marshall County, AL
(Guntersville-Arab
Medical Center),
7.00%, 10/1/09 2,090,340
Baa NR 2,000 Marshall County, AL
(Guntersville-Arab
Medical Center),
7.00%, 10/1/13 2,084,580
Baa3 BB 3,900 Massachusetts HEFA
(Milford-Whitinsville
Hospital), 7.75%,
7/15/17 4,085,640
Ba2 NR 5,000 Mississippi Hospital
Equipment and
Facilities Authority
(Magnolia Hospital),
7.375%, 10/1/21 5,068,000
A3 BBB+ 10,000 Philadelphia, PA
(Albert Eistein
Medical Center),
7.00%, 10/1/21 10,447,100
Ba2 BBB+ 9,000 Philadelphia, PA,
Graduate Health System
Obligated Group,
6.625%, 7/1/21 8,828,640
Baa NR 2,000 Prince George's
County, MD (Greater
SouthEast Healthcare
System), 6.375%, 1/1/23 1,941,960
Baa1 BBB+ 10,000 Randolph County
Building Commission,
WV (Davis Memorial
Hospital), 7.65%,
11/1/21 10,700,600
NR BBB- 8,000 Scranton-Lackawanna
Health and Welfare
Authority, PA (Moses
Taylor Hospital),
8.25%, 7/1/09 8,564,000
</TABLE>
See notes to financial statements
11
<PAGE>
National 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>
Hospitals (continued)
- ---------------------------------------------------------------------------
NR BBB- $ 4,500 Scranton-Lackawanna
Health and Welfare
Authority, PA (Moses
Taylor Hospital),
8.50%, 7/1/20 $ 4,849,560
Baa3 BBB 8,000 South Dakota Health
and Educational
Finance Authority,
Prarie Lakes Health
Care System Issue,
7.25%, 4/1/22 8,423,200
NR NR 4,900 Winslow, AZ,
Industrial Development
Authority (Winslow
Memorial Hospital),
9.50%, 6/1/22 5,395,880
- ---------------------------------------------------------------------------
$ 225,752,773
- ---------------------------------------------------------------------------
Hotels -- 0.3%
- ---------------------------------------------------------------------------
NR NR $ 1,046 Illinois Development
Finance Authority
(Comfort Inn -
O'Hare), 2.50%, 5/1/16 $ 575,053
NR NR 1,929 Illinois Development
Finance Authority
(Comfort Inn -
O'Hare), 10.00%, 5/1/16 2,082,860
NR NR 1,025 Kirksville, MO,
Industrial Development
Authority (Holiday
Inn), 10.50%, 7/1/03/(3)/ 461,250
NR NR 3,615 Kirksville, MO,
Industrial Development
Authority (Holiday
Inn), 11.00%, 7/1/16/(3)/ 1,626,750
NR NR 4,205 Niagara County, NY,
Industrial Development
Authority
(Wintergarden Inn
Associates), 9.75%,
6/1/11/(3)/ 1,682,000
- ---------------------------------------------------------------------------
$ 6,427,913
- ---------------------------------------------------------------------------
Housing -- 2.8%
- ---------------------------------------------------------------------------
Aa AA- $ 9,600 California Housing
Finance Agency (AMT),
Residual Interest
Bonds, Variable,
8/1/23/(4)/ $ 10,020,000
NR NR 9,405 Lake Creek Affordable
Housing Corp.,
Multifamily Housing,
8.00%, 12/1/23 9,742,357
NR NR 8,000 Los Angeles County
Housing Authority, CA,
Multifamily Housing,
Corporate Fund for
Housing Projects,
10.50%, 12/1/29 7,853,520
NR NR $ 1,300 Lucas County, County
Creek Project (AMT),
8.00%, 7/1/26 1,243,411
NR A 1,000 Maricopa County, AZ,
Industrial Development
Authority,
Multifamily, 6.45%,
1/1/17 1,019,690
NR A 5,675 Maricopa County, AZ,
Industrial Development
Authority,
Multifamily, 6.625%,
1/1/27 5,797,410
NR NR 2,185 Minneapolis Community
Development,
Multifamily (Lindsay
Brothers), 1.50%,
12/1/07 1,127,242
NR NR 3,240 Minneapolis Community
Development,
Multifamily (Lindsay
Brothers), 9.50%,
12/1/07 3,394,678
NR NR 4,740 North Little Rock, AR,
Residential Housing
Facilities (Parkstone
Place), 9.75%, 8/1/21 4,942,445
NR NR 8,745 North Miami, FL,
Health Care Facilities
(The Imperial Club),
9.25%, 1/1/13 9,701,616
NR NR 4,000 North Miami, FL,
Health Care Facilities
(The Imperial Club),
10.00%, 1/1/13 3,805,120
NR NR 1,600 Pittsfield Township,
MI (Economic
Development Corp),
7.875%, 8/15/27 1,476,928
- ---------------------------------------------------------------------------
$ 60,124,417
- ---------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 17.1%
- ---------------------------------------------------------------------------
Baa2 BBB $ 23,660 Alliance Airport
Authority Texas,
(Federal Express),
(AMT), 6.375%, 4/1/21 $ 23,651,246
NR NR 7,500 Austin, TX (Cargoport
Development LLC)
(AMT), 8.30%, 10/1/21 7,577,400
NR NR 2,000 Camden County, NJ,
Holt Hauling and
Warehousing System,
Inc. Project (AMT),
9.875%, 1/1/21 2,212,900
Baa2 NR 3,000 Camden, AL, MacMillan
Bloedel Project,
7.75%, 5/1/09 3,209,340
Baa2 BBB+ 6,050 Carbon County, UT
(Laidlaw) (AMT),
7.50%, 2/1/10 6,634,188
</TABLE>
See notes to financial statements
12
<PAGE>
National 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
- --------------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue (continued)
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Baa2 BB+ $ 28,000 Chicago, IL, O'Hare
International
(American Airlines),
7.875%, 11/1/25 $ 30,265,479
Baa2 BB+ 20,275 Chicago, IL, O'Hare
International,
(American Airlines),
8.20%, 12/1/24 23,763,922
NR NR 4,140 College Park, GA
(Airport Parking
Venture), 7.00%,
5/15/16 3,696,606
Baa1 BBB 24,000 Courtland, AL
(Champion
International
Corporation) (AMT),
7.00%, 6/1/22 25,024,320
Baa2 BB+ 41,000 Dallas-Fort Worth,
TX, International
Airport Facility
(American Airlines),
7.25%, 11/1/30 43,900,749
Baa3 BB 52,500 Denver, CO, (United
Airlines) (AMT),
6.875%, 10/1/32 54,393,149
Ba1 BB+ 12,175 Farmington, NM,
Pollution Control
Revenue, 6.375%, 4/1/22 12,254,138
Baa1 BBB 11,480 Gulf Coast Waste
Disposal, TX (Champion
International Corp.)
(AMT), 6.875%, 12/1/28 11,937,593
NR NR 5,928 Gwinnett County, GA
(Plastics/Packaging,
Inc.) (AMT), 9.00%,
5/1/13/(3)/ 3,556,542
NR NR 6,500 Kimball, NE, Economic
Development Authority,
(Clean Harbors Inc.)
(AMT), 10.75%, 9/1/26 6,550,050
NR NR 2,000 Los Angeles
International Airport
(Continental Airlines)
(AMT), 9.00%, 8/1/08 2,117,500
Baa1 BBB 10,000 Maine Finance
Authority, (Great
Northern Paper, Inc.,
Project - Bowater
Inc.) (AMT), 7.75%,
10/1/22 10,851,200
NR BBB 5,000 Maine Solid Waste
Disposal (Boise
Cascade Corp.) (AMT),
7.90%, 6/1/15 5,400,750
NR NR 1,700 Massachusetts
Industrial Finance
Agency (Boston Beer
Co.) (AMT), 11.50%,
7/15/07 1,781,566
Baa1 BBB 5,000 McMinn County, TN
(Calhoun Newsprint Co.
Project - Bowater
Inc.) (AMT), 7.40%,
12/1/22 5,366,100
NR NR 10,000 Michigan Strategic
(S.D. Warren Co.),
7.375%, 1/15/22 10,378,700
NR NR 15,000 Michigan Strategic
(S.D. Warren Co.),
7.375%, 1/15/22 15,568,050
NR NR 4,100 Middleboro, MA (Read
Corp.), 9.50%, 10/1/10 4,096,761
NR NR 17,000 New Jersey Economic
Development Authority
(Holt Hauling and
Warehouse), 7.80%,
12/15/16 16,966,170
NR NR 1,500 New Jersey Economic
Development Authority
(Holt Hauling and
Warehouse), 7.80%,
12/15/16 1,496,880
Baa2 BBB- 7,500 Pennsylvania
(MacMillan Bloedel)
(AMT), 7.60%, 12/1/20 8,311,050
NR BBB+ 10,000 Pennsylvania (Sun
Company, Inc.), (AMT),
7.60%, 12/1/24 11,078,100
B1 B 2,000 Riverdale Village, IL,
ACME Metals, Inc.
Project (AMT), 7.95%,
4/1/25 1,989,340
B1 B 2,585 Riverdale Village, IL,
ACME Metals, Inc.
Project, (AMT), 7.90%,
4/1/24 2,683,489
NR NR 4,000 Savannah, GA
(Intercat-Savannah
Inc.) (AMT), 9.00%,
1/1/15 4,234,800
Aa3 NR 2,605 Savannah, GA
(Intercat-Savannah,
Inc.) (AMT), 9.75%,
7/1/10 2,773,049
NR NR 1,000 State of Ohio, Solid
Waste (Republic
Engineered Steel,
Inc.) (AMT), 9.00%,
6/1/21 1,006,630
- --------------------------------------------------------------------------------
$ 364,727,757
- --------------------------------------------------------------------------------
Insured Electric Utilities -- 4.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 32,000 Intermountain Power
Agency, UT (MBIA),
5.75%, 7/1/19 /(2)/ $ 31,386,879
Aaa AAA 10,000 Intermountain Power
Agency, UT (MBIA),
6.00%, 7/1/16 10,011,000
Aaa AAA 10,000 Los Angeles, CA,
Department of Water
and Power (MBIA),
5.00%, 10/15/33 8,557,800
</TABLE>
See notes to financial statements
13
<PAGE>
National 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 Electric Utilities (continued)
- -------------------------------------------------------------------------
Aaa AAA $ 21,000 Sacramento, CA, Municipal
Utility District, (MBIA),
4.75%, 9/1/21/(1)/ $ 17,598,000
Aaa AAA 16,500 Sacramento, CA, Municipal
Utility District, (MBIA),
Variable, 11/15/15/(4)/ 15,035,625
Aaa AAA 7,500 South Carolina Public
Services, Forwards,
Series 96A, (FGIC),
5.75%, 1/1/22 7,348,950
Aaa AAA 15,350 South Carolina Public
Services, Residual
Interest Bonds,
(FGIC), Variable,
1/1/25/(4)/ 11,205,500
Aaa AAA 2,675 Washington Public
Power Supply System,
Nuclear Project Number
2, (MBIA), 14.375%,
7/1/01 3,326,684
- -------------------------------------------------------------------------
$ 104,470,438
- -------------------------------------------------------------------------
Insured General Obligations -- 1.2%
- -------------------------------------------------------------------------
Aaa AAA $ 19,500 State of California
(FGIC), 4.75%, 9/1/23 $ 16,277,625
Aaa AAA 10,000 State of California
(FSA), 4.75%, 9/1/18 8,476,800
- -------------------------------------------------------------------------
$ 24,754,425
- -------------------------------------------------------------------------
Insured Hospitals -- 0.9%
- -------------------------------------------------------------------------
Aaa AAA $ 10,000 Louisville, KY
(Alliant Health
System, Inc.) (MBIA),
Variable, 10/1/14/(4)/ $ 11,112,500
Aaa AAA 7,000 Montgomery, PA
(Abington Memorial
Hospital) (AMBAC),
Variable, 7/5/11/(4)/ 7,936,250
- -------------------------------------------------------------------------
$ 19,048,750
- -------------------------------------------------------------------------
Insured Housing -- 0.4%
- -------------------------------------------------------------------------
NR NR $ 7,525 SCA Multifamily
Mortgage, Industrial
Development Board,
Hamilton County, TN,
(AMT) (FSA), 7.35%,
1/1/30 $ 8,154,692
- -------------------------------------------------------------------------
$ 8,154,692
- -------------------------------------------------------------------------
Insured Industrial Development Revenue / Pollution Control
Revenue -- 0.5%
- -------------------------------------------------------------------------
Aaa AAA $ 11,950 Chicago, IL (The
Peoples Gas Light and
Coke Company) (AMT),
(AMBAC), Residual
Interest Bonds,
Variable, 12/1/23/(4)/ $ 10,665,375
- -------------------------------------------------------------------------
$ 10,665,375
- -------------------------------------------------------------------------
Insured Special Tax Revenue -- 5.9%
- -------------------------------------------------------------------------
Aaa AAA $ 20,000 Los Angeles County,
CA, Metropolitan
Transportation
(AMBAC), 4.75%, 7/1/18 $ 17,007,200
Aaa AAA 92,995 Metropolitan Pier and
Exposition Authority,
IL, McCormick Place
Expansion Project
(FGIC), 0%,
6/15/29 13,142,053
Aaa AAA 92,995 Metropolitan Pier and
Exposition Authority,
IL, McCormick Place
Expansion Project,
(MBIA), 0%,
6/15/28 13,978,078
NR NR 9,800 Metropolitan Pier and
Exposition Authority,
IL, McCormick Place
Expansion Project,
Residual Interest
Bonds, (MBIA), Variable,
6/15/27/(4)/ 9,677,500
Aaa AAA 10,655 Rancho Mirage, CA,
Water District
Financing, (AMBAC),
4.75%, 8/15/21 8,930,169
Aaa AAA 13,350 Rancho Mirage, CA,
Whitewater
Redevelopment Project,
(MBIA), 5.00%, 4/1/24/(1)/ 11,729,043
Aaa AAA 3,415 Regional Transportation
Authority, LA (FGIC), 0%,
12/1/12 1,398,613
Aaa AAA 10,935 Regional Transportation
Authority, LA (FGIC), 0%,
12/1/15 3,673,395
Aaa AAA 10,000 Regional Transportation
Authority, LA (FGIC), 0%,
12/1/21 2,307,600
Aaa AAA 40,000 South Orange, CA, Public
Financing, Foothill Area,
(FGIC), 5.50%, 8/15/15/(1)/ 37,746,399
Aaa AAA 7,000 Utah Municipal Finance Corp.,
Local Government Revenue,
(FSA), 0%, 3/1/10 3,395,560
</TABLE>
See notes to financial statements
14
<PAGE>
National 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 Special Tax Revenue (continued)
- -----------------------------------------------------------------------------
Aaa AAA $ 6,000 Utah Municipal Finance
Corp., Local
Government Revenue,
(FSA), 0%, 3/1/11 $ 2,733,420
- -----------------------------------------------------------------------------
$ 125,719,030
- -----------------------------------------------------------------------------
Insured Transportation -- 3.8%
- -----------------------------------------------------------------------------
Aaa AAA $ 23,015 Massachusetts State
Turnpike Authority
(FGIC), 5.125%,
1/1/23 $ 20,624,202
Aaa AAA 19,000 Massachusetts State
Turnpike Authority
(MBIA), 5.00%,
1/1/20 16,839,510
Aaa AAA 1,000 Massachusetts State
Turnpike Authority
(MBIA), 5.00%,
1/1/20 886,290
Aaa AAA 14,400 Metropolitan
Washington DC Airport
Authority (MBIA),
Variable, 4/1/21/(4)/ 13,464,000
Aaa AAA 18,200 Mobile, AL, Airport
Authority (MBIA),
6.375%, 10/1/14/(1)/ 19,238,128
Baa AAA 10,000 Triborough Bridge and
Tunnel Authority,
(MBIA), Variable,
1/1/19/(4)/ 10,062,500
- -----------------------------------------------------------------------------
$ 81,114,630
- -----------------------------------------------------------------------------
Insured Water and Sewer -- 1.2%
- -----------------------------------------------------------------------------
Aaa AAA $ 10,000 Detroit, MI, Sewer
Revenue (FGIC),
Variable, 7/1/23/(4)/ $ 8,925,000
Aaa AAA 7,150 Harrisburg, PA, Water
Revenue Bonds,
Residual Interest
Bonds (FGIC),
Variable, 8/11/16/(4)/ 5,916,625
Aaa AAA 10,000 New York City
Municipal Water
Finance Authority,
(FSA), Variable,
6/15/21/(4)/ 10,462,500
- -----------------------------------------------------------------------------
$ 25,304,125
- -----------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 0.6%
- -----------------------------------------------------------------------------
NR NR $ 6,645 Hardeman County, TN
(Correctional
Facilities Corp.),
7.75%, 8/1/17 $ 6,660,616
NR A- $ 3,500 Plymouth County, MA
(Plymouth County
Correctional
Facility), 7.00%, 4/1/22 3,842,860
NR NR 2,500 Saint Louis, MO,
Convention and Sports
Facility, 7.90%,
8/15/21 2,912,750
- -----------------------------------------------------------------------------
$ 13,416,226
- -----------------------------------------------------------------------------
Life Care -- 6.1%
- -----------------------------------------------------------------------------
NR NR $ 8,616 Albuquerque, NM, First
Mortgage Industrial
Development Revenue,
(La Vida Llena
Retirement Center),
8.625%, 2/1/20 $ 8,980,198
NR NR 7,000 Albuquerque, NM, First
Mortgage Industrial
Development Revenue,
(La Vida Llena
Retirement Center),
8.85%, 2/1/23 7,479,500
NR NR 5,744 Albuquerque, NM, First
Mortgage Industrial
Development Revenue,
(La Vida Llena
Retirement Center),
2.25%, 2/1/23 2,014,191
NR NR 10,000 Atlantic Beach, Fixed
Rate Improvement,
Fleet Landing Project,
8.00%, 6/1/24 10,550,800
NR NR 5,200 Kansas City, MO
Industrial Development
Authority (Kingswood
United Methodist
Manor), 9.00%, 11/15/13 5,481,892
NR NR 20,400 Loudoun County,
Industrial Development
Authority (Falcons
Landing), 8.75%,
11/1/24 21,404,904
NR NR 2,100 Loudoun County, VA,
Industrial Development
Authority, Residential
Care (Falcons Landing),
9.25%, 7/1/04 2,258,319
NR NR 1,950 New Hampshire Higher
Educational and Health
Facilities (Riverwoods
at Exeter), 8.00%,
3/1/01 1,993,505
NR NR 10,000 New Hampshire Higher
Educational and Health
Facilities (Riverwoods
at Exeter), 9.00%,
3/1/23 10,830,600
</TABLE>
See notes to financial statements
15
<PAGE>
National 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
- ------------------------------------------------------------------------------
Life Care (continued)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 3,500 New Jersey Economic
Development Authority
(Cadbury Corp.),
7.50%, 7/1/21 $ 3,509,660
NR NR 20,000 New Jersey Economic
Development Authority,
Keswick Pines Project,
8.75%, 1/1/24 21,074,800
NR NR 5,800 Ridgeland, MS, Urban
Renewal, The Orchard
Project Series 1993A,
7.75%, 12/1/15 6,007,524
NR NR 13,955 Saint Tammany Public
Finance, Christwood
Project, 9.00%,
11/15/25 14,757,133
NR NR 4,500 Vermont Industrial
Development Authority
(Wake Robin Corp.),
8.75%, 3/1/23 4,819,140
NR NR 7,500 Vermont Industrial
Development Authority
(Wake Robin Corp.),
8.75%, 4/1/23 /(5)/ 8,067,450
- ------------------------------------------------------------------------------
$ 129,229,616
- ------------------------------------------------------------------------------
Miscellaneous -- 2.5%
- ------------------------------------------------------------------------------
NR NR $ 6,530 American Samoa
Economic Development,
Executive Office
Building, 10.125%,
9/1/08 $ 7,062,587
NR NR 1,465 Atlanta, GA, Downtown
Development Authority,
(Central Atlanta
Hospitality Childcare,
Inc.), 8.00%, 1/1/26 1,418,882
NR A- 6,500 Los Angeles Regional
Airports Improvement
Corporation (LAXFuel)
(AMT), 6.50%, 1/1/32 6,561,880
NR NR 4,585 Mille Lacs Capital
Improvements (Mille
Lacs Band of Chippewa
Indians), 9.25%,
11/1/12 5,112,642
NR NR 22,500 New Jersey Sports and
Exposition Authority,
Monmouth Park Project,
8.00%, 1/1/25 24,701,850
NR NR 10,200 Orange County
Community Activity
Center Revenue Bonds,
8.00%, 3/1/24 9,638,184
- ------------------------------------------------------------------------------
$ 54,496,025
- ------------------------------------------------------------------------------
Nursing Homes -- 7.7%
- ------------------------------------------------------------------------------
NR NR $ 13,550 Bell County, TX,
(Riverside Healthcare,
Inc. - Normandy
Terrace), 9.00%, 4/1/23 $ 14,726,276
NR NR 4,600 Collier County, FL,
IDA, Retirement
Rental, (Beverly
Enterprises - Florida,
Inc.), 10.75%, 3/1/03 5,155,128
NR NR 5,000 Delaware County, PA
(Mainline - Haverford
Nursing and
Rehabilitation
Centers), 9.00%, 8/1/22 5,505,850
NR NR 5,460 Hillsborough County,
FL, Industrial
Development Authority,
Center for Independent
Living, Tampa
Projects, 11.00%,
3/1/19/(6)/ 4,914,000
NR NR 4,650 Hillsborough County,
FL, Industrial
Development Authority,
Center for Independent
Living, Tampa
Projects, 10.25%,
3/1/09/(6)/ 4,185,000
Baa1 NR 10,000 Indianapolis, IN
(National Benevolent
Association - Robin
Run Village), 7.625%,
10/1/22 10,752,500
NR NR 3,665 Lackawanna County, PA,
Industrial Development
Authority, (Edella
Street Associates),
8.875%, 9/1/14 3,957,357
NR NR 3,270 Luzerne County, PA,
Industrial Development
Authority (River
Street Associates),
8.75%, 6/15/07 3,508,350
NR NR 6,040 Massachusetts Health
and Education
Facilities Authority
(Fairview Extended
Care Services, Inc.),
10.125%, 1/1/11 6,794,638
NR NR 13,250 Massachusetts IFA, AGE
Institute of
Massachusetts Project,
8.05%, 11/1/25 13,360,505
NR NR 11,790 Mississippi Finance
Corp. (Magnolia
Healthcare), 7.99%,
7/1/25 11,674,222
NR NR 6,750 Missouri Health and
Education Authority
(Bethesda Health Group
of Saint Louis Inc.),
6.625%, 8/15/05 6,887,295
NR NR 14,000 Missouri Health and
Education Authority
(Bethesda Health Group
of Saint Louis, Inc.),
7.50%, 8/15/12 14,861,700
</TABLE>
See notes to financial statements
16
<PAGE>
National 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>
Nursing Homes (continued)
- ---------------------------------------------------------------------------
NR NR $ 12,500 Montgomery County, PA,
Industrial Development
Authority (Advancement
of Geriatric Health
Care Institute),
8.375%, 7/1/23 $ 13,118,500
NR NR 5,000 New Jersey Economic
Development Authority
(Claremont Health
System, Inc.), 9.10%,
9/1/22 5,398,100
NR NR 5,915 New Jersey Economic
Development Authority
(Victoria Health
Corporation), 7.75%,
1/1/24 6,024,368
NR NR 3,110 Okaloosa County,
(Beverly
Enterprises-Florida,
Inc.), 10.75%, 10/1/03 3,259,529
NR NR 3,500 Philadelphia, PA, The
Philadelphia
Protestant Home
Project, 8.625%, 7/1/21 3,716,475
Baa1 NR 3,870 Racine County, WI,
Health Center, 8.125%,
8/1/21 3,982,849
NR NR 5,000 Rhode Island Health
and Education Building
(Steere House), 8.25%,
7/1/15 5,259,900
NR NR 5,000 Sussex County, DE
(Delaware Health
Corporation), 7.50%,
1/1/14 5,000,400
NR NR 5,000 Sussex County, DE
(Delaware Health
Corporation), 7.60%,
1/1/24 5,000,400
NR NR 4,500 Tarrant County Health
Facilities, TX (3927
Foundation, Inc.),
10.25%, 9/1/19 4,746,060
NR NR 2,500 Westmoreland County,
PA, Industrial
Development Authority
(HIghland Health
Systems, Inc.), 9.25%,
6/1/22 2,677,800
- ---------------------------------------------------------------------------
$ 164,467,202
- ---------------------------------------------------------------------------
Pooled Loans -- 0.2%
- ---------------------------------------------------------------------------
A1 AA- $ 5,000 Port Seattle, WA,
6.00%, 12/1/14 $ 5,028,050
- ---------------------------------------------------------------------------
$ 5,028,050
- ---------------------------------------------------------------------------
Solid Waste -- 1.9%
- ---------------------------------------------------------------------------
Baa1 NR $ 2,500 Mercer County, NJ,
Improvement Authority
(AMT), 0%, 4/1/14 $ 720,750
Baa1 NR 5,000 Mercer County, NJ,
Improvement Authority
(AMT), 0%, 4/1/15 1,339,800
Baa1 NR 10,690 Mercer County, NJ,
Improvement Authority
(AMT), 0%, 4/1/16 2,662,451
NR NR 35,000 Robbins, Cook County,
IL (Robbins Resource
Recovery Partners,
L.P.), 8.375%, 10/15/16 36,344,699
- ---------------------------------------------------------------------------
$ 41,067,700
- ---------------------------------------------------------------------------
Special Tax Revenue -- 0.2%
- ---------------------------------------------------------------------------
Baa BBB $ 3,815 Inglewood, CA Public
Financing Authority,
In-Town,
Manchester-Prairie and
North Inglewood
Industrial Park
Redevelopment
Projects-Redevelopment
Loans, 7.00%, 5/1/22 $ 4,028,907
- ---------------------------------------------------------------------------
$ 4,028,907
- ---------------------------------------------------------------------------
Transportation -- 6.7%
- ---------------------------------------------------------------------------
Baa BBB $ 8,000 Denver, CO, Airport
System Revenue (AMT),
7.00%, 11/15/25 $ 8,326,240
Baa BBB 5,725 Denver, CO, Airport
System Revenue (AMT),
7.50%, 11/15/23 6,281,470
A A- 5,000 Hawaii Airport System
(AMT), 7.00%, 7/1/18 5,327,250
Aaa NR 13,008 Indiana Transportation
Finance Authority,
6.25%, 11/1/16 14,071,274
A2 NR 3,492 Indiana Transportation
Finance Authority,
6.25%, 11/1/16 3,590,335
A1 A+ 5,500 Massachusetts State
Turnpike Authority,
5.00%, 1/1/20 4,880,865
A1 AA- 15,000 Port Authority of New
York and New Jersey
(AMT), Variable,
1/15/27/(4)/ 15,768,750
NR NR 35,100 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/17 9,847,656
NR NR 54,400 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/18 14,311,008
NR NR 46,210 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/20 10,571,462
NR NR 72,685 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/21 15,441,201
</TABLE>
See notes to financial statements
17
<PAGE>
National 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
- -----------------------------------------------------------------------------
Transportation (continued)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 29,225 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/22 $ 5,816,652
NR NR 45,045 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/23 8,399,091
NR NR 108,260 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/24 18,911,939
NR NR 15,000 San Joaquin Hills, CA,
Toll Roads, 0%, 1/1/25 2,454,900
- -----------------------------------------------------------------------------
$ 144,000,093
- -----------------------------------------------------------------------------
Water and Sewer -- 0.5%
- -----------------------------------------------------------------------------
A2 A- $ 10,000 New York City
Municipal Water
Finance Authority,
6.25%, 6/15/21 $ 10,166,600
- -----------------------------------------------------------------------------
$ 10,166,600
- -----------------------------------------------------------------------------
Total Tax-Exempt Investments
(identified cost $1,984,862,205) $2,133,979,386
- -----------------------------------------------------------------------------
</TABLE>
Taxable Investment -- 0.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------
Life Care -- 0.0%
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 725 Ridgeland, MS, Urban
Renewal, The Orchard
Limited Project,
Series 1993B, 9.000%,
12/1/00 $ 730,278
- -----------------------------------------------------------------------------
$ 730,278
- -----------------------------------------------------------------------------
Total Taxable Investment
(identified cost $725,000) $ 730,278
- -----------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $1,985,587,205) $2,134,709,664
- -----------------------------------------------------------------------------
</TABLE>
/(1)/ Security has been segregated to cover when-issued securities.
/(2)/ When-issued security.
/(3)/ Non-income producing security.
/(4)/ Security has been issued as an inverse floater bond.
/(5)/ Security has been segregated to cover margin requirements on open
financial futures contracts.
/(6)/ The Portfolio is accruing only partial interest on this security.
At March 31, 1997 the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments, is as follows:
California 12.6%
Others, representing less than 10% individually 87.4%
The Portfolio invests primarily in debt securities issued by 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, 18.7% of the securities in the portfolio of investments are backed by
bond insurance of various financial institutions and financial guaranty
assurance agencies. The aggregate percentage insured by financial institutions
ranged from 1.1% to 8.7% of total investments.
See notes to financial statements
18
<PAGE>
National 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 $1,985,587,205) $ 2,134,709,664
Cash 922
Receivable for investments sold 9,814,585
Interest receivable 39,304,269
Deferred organization expenses (Note 1D) 17,345
- -----------------------------------------------------------------------------------------
Total assets $ 2,183,846,785
- -----------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------
Demand note payable (Note 5) $ 44,769,000
Payable for investments purchased 33,326,180
Payable to affiliate Trustees' fees (Note 2) 7,300
Accrued expenses 177,812
- -----------------------------------------------------------------------------------------
Total liabilities $ 78,280,292
- -----------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 2,105,566,493
- -----------------------------------------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 1,956,444,034
Net unrealized appreciation of investments (computed on
basis of identified cost) 149,122,459
- -----------------------------------------------------------------------------------------
Total $ 2,105,566,493
- -----------------------------------------------------------------------------------------
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
March 31, 1997
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------
<S> <C>
Interest income $ 77,255,187
- -----------------------------------------------------------------------------------------
Total income $ 77,255,187
- -----------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 4,810,748
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 14,616
Interest expense (Note 5) 700,129
Custodian fee 169,643
Legal and accounting services 75,215
Amortization of organization expenses (Note 1D) 9,730
Miscellaneous 59,379
- -----------------------------------------------------------------------------------------
Total expenses $ 5,839,460
- -----------------------------------------------------------------------------------------
Net investment income $ 71,415,727
- -----------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -----------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 15,122,044
Financial futures contracts (18,889,375)
- -----------------------------------------------------------------------------------------
Net realized loss on investments transactions $ (3,767,331)
- -----------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (13,338,322)
Financial futures contracts 5,721,300
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ (7,617,022)
- -----------------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (11,384,353)
- -----------------------------------------------------------------------------------------
Net increase in net assets from operations $ 60,031,374
- -----------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
19
<PAGE>
National 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 $ 71,415,727 $ 150,829,621
Net realized gain (loss)
on investments (3,767,331) 1,307,718
Net change in unrealized
appreciation (depreciation)
of investments (7,617,022) 21,364,900
- --------------------------------------------------------------------------------------
Net increase in net assets
from operations $ 60,031,374 $ 173,502,239
- --------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 152,809,022 $ 517,368,709
Withdrawals (319,751,905) (739,039,309)
- --------------------------------------------------------------------------------------
Net decrease in net assets
resulting from
capital transactions $ (166,942,883) $ (221,670,600)
- --------------------------------------------------------------------------------------
Total decrease in net assets $ (106,911,509) $ (48,168,361)
- --------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------
At beginning of period $ 2,212,478,002 $ 2,260,646,363
- --------------------------------------------------------------------------------------
At end of period $ 2,105,566,493 $ 2,212,478,002
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
20
<PAGE>
National 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 *
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.54%+ 0.49% 0.50% 0.50% 0.47%+
Net expenses after custodian fee reduction 0.54%+ 0.48% 0.49% -- --
Net investment income 6.55%+ 6.65% 7.00% 6.55% 6.58%+
Portfolio Turnover 10% 19% 54% 40% 13%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 2,105,566 $ 2,212,478 $ 2,260,646 $ 2,210,936 $ 2,083,322
- ------------------------------------------------------------------------------------------------------------------------------------
</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
21
<PAGE>
National Municipals Portfolio as of March 31, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
---------------------------------------------------------------------------
National Municipals Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a 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 Valuation -- 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 listed on
the commodity exchanges are valued at closing settlement 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 Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes
on any taxable income of the Portfolio because each investor in the
Portfolio is 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. Interest income received by the Portfolio on
investments in municipal bonds, which is excludable from gross income under
the Internal Revenue Code, will retain its status as income exempt from
federal income tax when allocated to the Portfolio's investors. The portion
of such interest, if any, earned on private activity bonds issued after
August 7, 1986 may be considered a tax preference item for investors.
D Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day,
dependent on the daily fluctuations in the value of the underlying
security, and are recorded for book purposes as unrealized gains or losses
by the Portfolio. The Portfolio's investment in financial futures contracts
is designed only to hedge against anticipated future changes in interest
rates. Should interest rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
F Legal Fees -- Legal fees and other related expenses incurred as part of
negotiations of the terms and requirements of capital infusions, or that
are expected to result in the restructuring of or a plan of reorganization
for an investment are recorded as realized losses. Ongoing expenditures to
protect or enhance an investment are treated as operating expenses.
G When-issued and Delayed Delivery Transactions -- The Portfolio may engage
in when-issued or delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such
that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin 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.
22
<PAGE>
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 balance 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 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 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 0.44%(annualized) of the Portfolio's average net
assets for such period and amounted to $4,810,748. 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 percentage 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
---------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities
and short-term obligations, aggregated $216,993,467 and $301,600,458,
respectively.
4 Federal Income Tax Basis of Investments
---------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at March 31, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
Aggregate cost $ 1,985,587,205
---------------------------------------------------------------------------
Gross unrealized appreciation $ 165,519,624
Gross unrealized depreciation (16,397,165)
---------------------------------------------------------------------------
Net unrealized appreciation $ 149,122,459
---------------------------------------------------------------------------
</TABLE>
5 Line of Credit
---------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $120 million unsecured line of credit
agreement with a group of banks. Borrowing 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 quarter. For the six
months ended March 31, 1997, the average daily loan balance was $11,098,132
and the average interest rate was 6.22%. The maximum borrowings at any
month end during the six months ended March 31, 1997 was $91,316,000. At
March 31, 1997, the Portfolio had a balance outstanding pursuant to this
line of credit of $44,769,000.
6 Financial Instruments
---------------------------------------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options and futures contracts and may involve, to a varying
degree, elements of risk in excess of the amounts recognized for financial
statement purposes.
The notional or contractual amounts of these instruments represent the
investment 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.
There were no outstanding obligations under these financial instruments at
March 31, 1997.
23
<PAGE>
EV Marathon National Municipals Fund as of March 31, 1997
INVESTMENT MANAGEMENT
EV Marathon National Municipals Fund
<TABLE>
<CAPTION>
<S> <C>
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
James B. Hawkes
Vice President and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Robert B. MacIntosh Harvard University Graduate School of Business Administration
Vice President
Norton H. Reamer
James L. O'Connor President and Director, United Asset
Treasurer Management Corporation
Thomas Otis John L. Thorndike
Secretary Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
National Municipals Portfolio
<CAPTION>
<S> <C>
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
James B. Hawkes
Vice President and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Robert B. MacIntosh Harvard University Graduate School of Business Administration
Vice President
Norton H. Reamer
Thomas M. Metzold President and Director, United Asset
Vice President and Portfolio Manager Management Corporation
James L. O'Connor John L. Thorndike
Treasurer Formerly Director, Fiduciary Company Incorporated
Thomas Otis Jack L. Treynor
Secretary Investment Adviser and Consultant
</TABLE>
24
<PAGE>
Investment Adviser of
National Municipals Portfolios
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of EV Marathon
National Municipals Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
EV Marathon National Municipals Fund
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 distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
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M-HMSRC-5/97
