<PAGE>
[LOGO OF EATON VANCE Investing
MUTUAL FUNDS APPEARS
HERE] for the
EDUCATION
21st
[PHOTOGRAPH APPEARS HERE]
Century
Annual Report August 31, 1997
Alabama
EATON VANCE
[PHOTOGRAPH Arkansas
APPEARS MUNICIPALS
HERE] Georgia
TRUST
Kentucky
MARATHON
Louisiana
Global Management-Global Distribution
Maryland
[PHOTOGRAPH Missouri
APPEARS
HERE] North Carolina
Oregon
South Carolina
Tennessee
Virginia
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
President
The municipal bond market has continued to respond favorably in 1997 to an
economic climate characterized by solid growth and low inflation. First quarter
GDP rose 4.9%, while GDP in the second quarter posted a 3.3% gain, according to
the U.S. Commerce Department. Meanwhile, inflation has remained in the 2-to-3%
range. While the Federal Reserve elected to raise short-term rates slightly in
March, it has since maintained a generally stable interest rate policy in
response to a benign inflation outlook. Not surprisingly, municipal bonds have
turned in solid returns, with the Lehman Brothers Municipal Bond Index*--an
unmanaged index of municipal bonds--rising 9.2% during the year ended August 31,
1997.
The municipal bond market has been characterized by heavy issuance and strong
investor demand
According to Standard & Poor's, nearly $227 billion in municipal securities were
brought to market in 1996, a 14% increase from the prior year. Thus far in 1997,
municipal issuance has kept up that pace. Issuers have redeemed older bonds with
relatively high coupons and replaced them with new bonds bearing lower coupons.
This municipal refunding activity has been sparked in part by the strong market
rally of recent months that has seen yields for 30-year AAA-rated general
obligations decline to the 5.35% level at August 31, according to Bloomberg. At
that level, municipal yields represent 81% of 30-year Treasury yields, making
them an attractive option for investors.
Municipal bonds yield 81% of Treasury yields
[BAR GRAPHS APPEAR HERE]
<TABLE>
<S> <C>
30-Year AAA-ruled
General obligation (GO) Bonds* 5.35%
Taxable equivalent yield
in 36% tax bracket 8.36%
30-Year Treasury bond 6.61%
</TABLE>
Principal and interest payments of Treasury securities are guaranteed by the
U.S. government.
*GO yields are a compilation of a representative variety of general obligations
and are not necessarily representative of the Fund's yield. Statistics as of
August 31, 1997.
Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
Amid Washington's newly found fiscal responsibility, the outlook for municipal
bonds appears bright
We believe the long-term outlook for municipal bonds has improved in the past
year for several reasons. First, with Congress and the Clinton Administration
having reached agreement on a plan to balance the budget by 2002, the budgetary
nightmare that has long plagued the nation may be coming to an end. A balanced
budget would sharply reduce the government's borrowing needs, leading to lower
interest rates and channeling investments into more productive areas of the
economy. Second, even after the recently enacted capital gains tax cut, the
marginal tax rates of many taxpayers remain high. For those taxpayers, municipal
bonds may still be one of the best vehicles for tax relief. And finally, a
balanced investment portfolio features a mix of equities, bonds, and cash. We
believe, that following three years of stock market outperformance, investors
should consider reallocating a portion of their portfolios to bonds in order to
maintain a prudent asset allocation. For these reasons, we believe that the
municipal market will continue to attract investments from tax-conscious
investors. Eaton Vance will continue its leadership role in seeking high, tax-
free income for investors.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter,
President
October 7, 1997
*It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are
subject to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
2
<PAGE>
EV Marathon Alabama Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF WILLIAM H. AHERN APPEARS HERE]
William H. Ahern,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Economic growth in Alabama slowed in 1996 after several years of solid
activity. Annual gross state product (GSP) growth exceeded 3% in 1993, 1994,
and 1995, while payroll employment grew 2.5% in each of those years. In 1996,
GSP growth fell to less than 2%, while payroll employment grew 1.1%.
. Part of the economic slowdown in 1996 resulted from declines in the apparel
and textile industries, which lost almost 9,000 jobs. Mining employment
increased, however, as did employment in the construction, retail, and
financial sectors.
. Farm income growth has been strong in the past several years, ranking
Alabama near the top of the southeastern U.S. in this sector.
. Despite a slow year in 1996, Alabama's 1997 economic outlook is positive.
A new large-scale Mercedes auto manufacturing plant, opening this year, will
create many new jobs and may help boost state population. GSP growth is
expected to rise to 3%, while payrolls are expected to grow by 2%.
Management Update
- --------------------------------------------------------------------------------
. The bond market has been generally favorable over the past year, with
declining interest rates translating into solid total returns for investors.
Recently the market has been fairly volatile, providing opportunities to find
attractive bonds for the Fund.
. Portfolio management has focused on finding discount bonds, which have better
upside potential, while our research staff has focused on locating non-rated,
higher-yielding bonds which can increase the Fund's income without taking
unnecessary risks.
. Insured bonds, prevalent in Alabama, provide excellent security but do not
offer as much upside potential. As a result, fund turnover has been low as we
increasingly seek issues meeting our high total return criteria.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
8.3%./1/ This return resulted from an increase in net asset value per share
to $10.85 on August 31, 1997 from $10.46 on August 31, 1996, and the
reinvestment of $0.465 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.85 per
share, the Fund's distribution rate on August 31, 1997 was 4.29%. The SEC 30-
day yield on that date was 3.74%./3/
. To equal 4.29% in a taxable investment, a couple in the 39.2% combined
federal and state tax bracket would need a yield of 7.06%.
Your Investment at Work
- --------------------------------------------------------------------------------
City of Birmingham Special Care Facilities
Financing Authority -- Children's Hospital
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
. This bond issue helped finance several significant capital improvements to
The Children's Hospital of Alabama, a 190-bed, highly specialized acute care
facility for infants and children affiliated with The University of Alabama,
Birmingham.
. Improvements included renovations to the emergency department, special care
nursery, burn unit, psychiatric unit, and several clinic facilities and
replacement of the hospital's magnetic resonance imaging (MRI) system. A new
1,711-space parking facility was also built.
- --------------------------------------------------------------------------------
/1/This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect contingent
deferred sales charge (CDSC), deducted at redemption as follows: 5% - 1st and
2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. Past
performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
5/1/92. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. It is not possible to invest directly in the index.
** This figure represents the Fund's performance including applicable contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.3%
Five Year 6.0
Life of Fund (5/1/92) 6.7
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent deferred
sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.3%
Five Year 5.7
Life of Fund (5/1/92) 6.5
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From May 31, 1992, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers EV Marathon Alabama
Date Municipal Bond Index Fund/CDSC** Municipals Fund
---- -------------------- --------- -------------------
<S> <C> <C> <C>
5/31/92 $10,000 $13,890 $10,000
6/30/92 $10,168 $13,890 $10,225
7/31/92 $10,473 $13,890 $10,685
8/31/92 $10,370 $13,890 $10,438
9/30/92 $10,438 $13,890 $10,476
10/31/92 $10,336 $13,890 $10,231
11/30/92 $10,521 $13,890 $10,571
12/31/92 $10,628 $13,890 $10,702
1/31/93 $10,752 $13,890 $10,806
2/28/93 $11,141 $13,890 $11,255
3/31/93 $11,023 $13,890 $11,094
4/30/93 $11,134 $13,890 $11,229
5/31/93 $11,197 $13,890 $11,294
6/30/93 $11,384 $13,890 $11,469
7/31/93 $11,398 $13,890 $11,466
8/31/93 $11,636 $13,890 $11,722
9/30/93 $11,769 $13,890 $11,847
10/31/93 $11,791 $13,890 $11,875
11/30/93 $11,687 $13,890 $11,733
12/31/93 $11,934 $13,890 $12,032
1/31/94 $12,070 $13,890 $12,152
2/28/94 $11,758 $13,890 $11,806
3/31/94 $11,279 $13,890 $11,150
4/30/94 $11,374 $13,890 $11,223
5/31/94 $11,473 $13,890 $11,330
6/30/94 $11,406 $13,890 $11,212
7/31/94 $11,612 $13,890 $11,474
8/31/94 $11,652 $13,890 $11,470
9/30/94 $11,481 $13,890 $11,263
10/31/94 $11,277 $13,890 $10,977
11/30/94 $11,073 $13,890 $10,709
12/31/94 $11,317 $13,890 $11,061
1/31/95 $11,641 $13,890 $11,476
2/28/95 $11,979 $13,890 $11,854
3/31/95 $12,117 $13,890 $11,954
4/30/95 $12,131 $13,890 $11,945
5/31/95 $12,518 $13,890 $12,301
6/30/95 $12,409 $13,890 $12,092
7/31/95 $12,526 $13,890 $12,176
8/31/95 $12,685 $13,890 $12,317
9/30/95 $12,765 $13,890 $12,353
10/31/95 $12,951 $13,890 $12,591
11/30/95 $13,166 $13,890 $12,830
12/31/95 $13,292 $13,890 $12,961
1/31/96 $13,393 $13,890 $13,035
2/28/96 $13,302 $13,890 $12,891
3/31/96 $13,132 $13,890 $12,696
4/30/96 $13,095 $13,890 $12,686
5/31/96 $13,090 $13,890 $12,697
6/30/96 $13,233 $13,890 $13,822
7/31/96 $13,353 $13,890 $12,928
8/31/96 $13,350 $13,890 $12,914
9/30/96 $13,536 $13,890 $13,112
10/31/96 $13,689 $13,890 $13,195
11/30/96 $13,940 $13,890 $13,381
12/31/96 $13,881 $13,890 $13,343
1/31/97 $13,907 $13,890 $13,379
2/28/97 $14,035 $13,890 $13,521
3/31/97 $13,848 $13,890 $13,337
4/30/97 $13,964 $13,890 $13,460
5/31/97 $14,174 $13,890 $13,661
6/30/97 $14,325 $13,890 $13,777
7/31/97 $14,722 $13,890 $14,132
8/31/97 $14,584 $13,890 $13,990
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.67% of the total dividends paid by the Fund from net invest-ment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
3
<PAGE>
EV Marathon Arkansas Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Manufacturing plays an important role in Arkansas' economy, and weakness in
this sector -- in part due to the effects of a national decline in the
apparel and textile industries -- caused the state's economy to slow in 1995-
1996 after strong years in 1993 and 1994. Growth in gross state product (GSP)
in 1996 was 2.4%, down from over 4% in 1993 and 1994.
. Despite the short-term decline in manufacturing, other industries remain
healthy and are expanding, including communications and utilities, retailing,
financial services, business services and health care.
. In the fall of 1996, manufacturing began to recover, especially in the
construction, lumber & furniture and durable goods industries. As a result,
GSP in Arkansas is expected to grow 3.1% in 1997 and 3.4% in 1998. Population
growth has slowed somewhat but is still stronger than in the 1980s.
Management Update
- --------------------------------------------------------------------------------
. This has been a generally positive year for the bond market, with favorable
returns overall. However, the market has been increasingly volatile.
Quarterly price swings often resulted from whether or not economic data
confirmed or negated the so-called "new economy paradigm," which states, in
part, that productivity gains allow growth to continue with low inflation.
. Due to the decline in supply of new issues, Arkansas bonds performed very
well. This allowed us to selectively sell some holdings at advantageous
prices when it was appropriate to do so.
. We continue to maintain diversification in the Portfolio across sectors and
credit quality as we seek to combine high-quality insured holdings, which
provide upside performance, with higher-yielding issues, which provide income
and stability in a down market.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
7.7%./1/ This return resulted from an increase in net asset value per share
to $10.51 on August 31, 1997 from $10.19 on August 31, 1996, and the
reinvestment of $0.449 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.51 per
share, the Fund's distribution rate on August 31, 1997 was 4.28%. The SEC 30-
day yield on that date was 3.93%./3/
. To equal 4.28% in a taxable investment, a couple in the 40.48% combined
federal and state tax bracket would need a yield of 7.19%.
Your Investment at Work
- --------------------------------------------------------------------------------
[AIRPLANE GRAPHIC APPEARS HERE]
Northwest Arkansas Regional Airport Authority -- Series 1997 Airport
Revenue Bonds
. This bond issue will finance the design and construction of a new airport and
airfield facilities to replace the existing Drake Field and will serve the
expanding needs of northwest Arkansas.
. The new facility will include an 8,800 foot long runway and a parallel
taxiway that is 8,800 feet by 150 feet. It will be served by an air traffic
control tower and a fully equipped air rescue and fire fighting facility. The
two-level, 77,800 square foot terminal building will provide all necessary
services and conveniences.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state
income taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 10/2/92. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 7.7%
Life of Fund (10/2/92) 6.0
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent deferred sales
charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 2.7%
Life of Fund (10/2/92) 5.7
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From October 31, 1992, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
Arkansas Municipal
Date Municipals Fund Fund/CDSC** Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1/31/92 $10,000 $13,449 $10,000
11/30/92 $10,331 $13,449 $10,179
12/31/92 $10,482 $13,449 $10,283
1/31/93 $10,648 $13,449 $10,403
2/28/93 $11,130 $13,449 $10,779
3/31/93 $11,008 $13,449 $10,665
4/30/93 $11,124 $13,449 $10,773
5/31/93 $11,199 $13,449 $10,833
6/30/93 $11,387 $13,449 $11,014
7/31/93 $11,396 $13,449 $11,028
8/31/93 $11,633 $13,449 $11,258
9/30/93 $11,770 $13,449 $11,386
10/31/93 $11,766 $13,449 $11,408
11/30/93 $11,645 $13,449 $11,308
12/31/93 $11,925 $13,449 $11,546
1/31/94 $12,078 $13,449 $11,678
2/28/94 $11,730 $13,449 $11,376
3/31/94 $11,035 $13,449 $10,913
4/30/94 $11,162 $13,449 $11,005
5/31/94 $11,291 $13,449 $11,100
6/30/94 $11,181 $13,449 $11,036
7/31/94 $11,433 $13,449 $11,235
8/31/94 $11,472 $13,449 $11,274
9/30/94 $11,262 $13,449 $11,108
10/31/94 $10,950 $13,449 $10,911
11/30/94 $10,610 $13,449 $10,714
12/31/94 $10,930 $13,449 $10,950
1/31/95 $11,324 $13,449 $11,263
2/28/95 $11,716 $13,449 $11,590
3/31/95 $11,816 $13,449 $11,723
4/30/95 $11,806 $13,449 $11,737
5/31/95 $12,141 $13,449 $12,112
6/30/95 $11,942 $13,449 $12,006
7/31/95 $12,038 $13,449 $12,119
8/31/95 $12,179 $13,449 $12,273
9/30/95 $12,263 $13,449 $12,351
10/31/95 $12,478 $13,449 $12,530
11/30/95 $12,717 $13,449 $12,739
12/31/95 $12,862 $13,449 $12,861
1/31/96 $12,911 $13,449 $12,958
2/28/96 $12,754 $13,449 $12,870
3/31/96 $12,545 $13,449 $12,706
4/30/96 $12,509 $13,449 $12,670
5/31/96 $12,484 $13,449 $12,665
6/30/96 $12,596 $13,449 $12,803
7/31/96 $12,700 $13,449 $12,919
8/31/96 $12,673 $13,449 $12,916
9/30/96 $12,858 $13,449 $13,097
10/31/96 $12,940 $13,449 $13,245
11/30/96 $13,126 $13,449 $13,487
12/31/96 $13,086 $13,449 $13,430
1/31/97 $13,083 $13,449 $13,456
2/28/97 $13,199 $13,449 $13,579
3/31/97 $13,050 $13,449 $13,398
4/30/97 $13,147 $13,449 $13,510
5/31/97 $13,322 $13,449 $13,714
6/30/97 $13,450 $13,449 $13,860
7/31/97 $13,754 $13,449 $14,244
8/31/97 $13,649 $13,449 $14,110
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.68% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
4
<PAGE>
EV Marathon Georgia Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON APPEARS HERE]
Cynthia J. Clemson
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. As Georgia geared up for the 1996 Olympic games, its economy benefited for
several years from the activity surrounding the preparations. As a result,
gross state product (GSP) increased by more than 5% annually in 1993, 1994 and
1995.
. During the Olympic year, activity slowed somewhat, and the state's GSP rose
4.6%. This year the economy is expected to continue growing, albeit at a
slower 3% level. Growth in 1998 is also forecast to rise at a 3% pace.
. The service sector was Georgia's primary beneficiary of the 1996 Olympics, and
it slowed considerably when the Games ended. Fortunately, manufacturing picked
up in 1996 and is continuing to expand. Construction remains healthy, as are
trade, services, and transportation, which all saw growth exceeding 4% in
1996. Government spending has slowed, primarily as a result of defense
cutbacks.
Management Discussion
- --------------------------------------------------------------------------------
. Municipal issuance at the state level has been fairly low this past year,
and Georgia's municipal market was no exception. As a result, we focused our
efforts in sectors where issuance was higher.
. Two sectors where we found higher issuance were the hospital and industrial
development revenue (IDR) areas. IDR bonds tend to provide higher yields and
good credit diversification. The hospital bonds we found offer excellent call
protection, which enhances their long-term performance.
. Housing bonds have also offered some value recently, as they offer a yield
advantage over revenue bonds. Moreover, they generally involve offering lower
prepayment risk because mortgage rates are historically low.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
8.2%./1/ This return resulted from an increase in net asset value per share to
$10.14 on August 31, 1997 from $9.81 on August 31, 1996, and the reinvestment
of $0.455 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.14
per share, the Fund's distribution rate on August 31, 1997 was 4.49%. The SEC
30-day yield on that date was 4.08%./3/
. To equal 4.49% in a taxable investment, a couple in the 39.84% combined
federal and state tax bracket would need a yield of 7.46%.
Your Investment at Work
- --------------------------------------------------------------------------------
[GRAPHIC OF FACTORY APPEARS HERE]
Cartersville, Georgia Development Authority -- Sewage Facilities Revenue
Bonds, Anheuser-Busch Project
. This industrial development revenue bond provides funding to improve and
expand sewage facilities located near the Anheuser-Busch brewery in
Cartersville.
. The bonds are backed by the full faith and credit of Anheuser-Busch
Companies, Inc., the world's largest brewer of beer.
. The bonds are rated A1 by Moodys and A+ by Standard & Poor's and are a good
example of a higher yielding issue backed by a sound corporate entity.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales charge
(CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/23/91. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
Performance/4/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.2%
Five Year 5.2
Life of Fund (12/23/91) 5.6
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent
deferred sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.2%
Five Year 4.8
Life of Fund (12/23/91) 5.4
</TABLE>
[LINE GRAPH APPEARS HERE]
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From December 31, 1991, through August 31, 1997
<TABLE>
<CAPTION>
Lehman Brothers EV Marathon Georgia
Date Municipal Bond Index Fund/CDSC** Municipals Fund
---- -------------------- --------- -------------------
<S> <C> <C> <C>
12/31/91 $10,000 $13,508 $10,000
1/31/92 $10,023 $13,508 $9,880
2/28/92 $10,026 $13,508 $9,908
3/31/92 $10,030 $13,508 $9,886
4/30/92 $10,119 $13,508 $9,968
5/31/92 $10,238 $13,508 $10,154
6/30/92 $10,410 $13,508 $10,374
7/31/92 $10,722 $13,508 $10,799
8/31/92 $10,618 $13,508 $10,587
9/30/92 $10,687 $13,508 $10,585
10/31/92 $10,582 $13,508 $10,281
11/30/92 $10,772 $13,508 $10,622
12/31/92 $10,882 $13,508 $10,751
1/31/93 $11,008 $13,508 $10,859
2/28/93 $11,406 $13,508 $11,366
3/31/93 $11,286 $13,508 $11,155
4/30/93 $11,399 $13,508 $11,306
5/31/93 $11,463 $13,508 $11,361
6/30/93 $11,655 $13,508 $11,553
7/31/93 $11,670 $13,508 $11,505
8/31/93 $11,913 $13,508 $11,780
9/30/93 $12,049 $13,508 $11,919
10/31/93 $12,072 $13,508 $11,913
11/30/93 $11,966 $13,508 $11,786
12/31/93 $12,218 $13,508 $12,054
1/31/94 $12,358 $13,508 $12,187
2/28/94 $12,038 $13,508 $11,837
3/31/94 $11,547 $13,508 $11,198
4/30/94 $11,646 $13,508 $11,259
5/31/94 $11,746 $13,508 $11,309
6/30/94 $11,678 $13,508 $11,194
7/31/94 $11,889 $13,508 $11,417
8/31/94 $11,930 $13,508 $11,433
9/30/94 $11,755 $13,508 $11,237
10/31/94 $11,546 $13,508 $10,937
11/30/94 $11,337 $13,508 $10,608
12/31/94 $11,587 $13,508 $10,901
1/31/95 $11,918 $13,508 $11,269
2/28/95 $12,265 $13,508 $11,612
3/31/95 $12,406 $13,508 $11,726
4/30/95 $12,420 $13,508 $11,703
5/31/95 $12,816 $13,508 $11,998
6/30/95 $12,074 $13,508 $11,802
7/31/95 $12,825 $13,508 $11,838
8/31/95 $12,987 $13,508 $11,993
9/30/95 $13,069 $13,508 $12,089
10/31/95 $13,259 $13,508 $12,309
11/30/95 $13,480 $13,508 $12,553
12/31/95 $13,609 $13,508 $12,687
1/31/96 $13,712 $13,508 $12,748
2/28/96 $13,619 $13,508 $12,595
3/31/96 $13,445 $13,508 $12,390
4/30/96 $13,407 $13,508 $12,351
5/31/96 $13,402 $13,508 $12,347
6/30/96 $13,548 $13,508 $12,476
7/31/96 $13,671 $13,508 $12,584
8/31/96 $13,668 $13,508 $12,582
9/30/96 $13,859 $13,508 $12,787
10/31/96 $14,015 $13,508 $12,885
11/30/96 $14,272 $13,508 $13,103
12/31/96 $14,212 $13,508 $13,049
1/31/97 $14,239 $13,508 $13,033
2/28/97 $14,369 $13,508 $13,180
3/31/97 $14,178 $13,508 $13,013
4/30/97 $14,297 $13,508 $13,127
5/31/97 $14,512 $13,508 $13,296
6/30/97 $14,666 $13,508 $13,375
7/31/97 $15,073 $13,508 $13,743
8/31/97 $14,931 $13,508 $13,608
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.14% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
5
<PAGE>
EV Marathon Kentucky Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF NICOLE ANDERES APPEARS HERE]
Nicole Anderes,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Kentucky's economy slowed in 1996, after posting solid growth the previous
four years. The primary causes for the slowdown were declines in the
manufacturing and mining sectors. Total payroll employment, which grew 3.2% in
1994 and 2.9% in 1995, grew a more modest 1.7% last year.
. Economic growth in Kentucky, as measured by gross state product (GSP), was
1.1% in 1996. Within manufacturing, heavy industries such as furniture,
transportation equipment, and printing performed well.
. Non-manufacturing sectors helped buoy the economy as the state continues to
diversify its base. The trade, transportation, finance and business services
sectors all posted solid gains in 1996. Growth is expected to revive somewhat
in 1997 and 1998, with forecasted GSP gains of 2.3% and 2.6%, respectively.
Management Update
- --------------------------------------------------------------------------------
. The Fund's strong performance over the past year resulted from a combination
of several positive factors. First, the Fund's coupon "barbell" structure - in
which high and low coupon bonds are balanced -- performed well in a generally
declining interest rate environment. Second, duration was kept in a targeted
range to reduce volatility. Finally, the large portfolio allocation to high-
yielding IDBs helped boost total return.
. During the period, the Fund was restructured by increasing the number of
lower-priced bonds, which perform especially well when rates decline, and by
improving call protection.
. With a combination of yield, or high-coupon bonds on the one hand, and lower-
priced "performance" bonds on the other, the Fund has a "barbell" structure
which provides both income and total return.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of 9.1%./1/
This return resulted from an increase in net asset value per share to $10.41
on August 31, 1997 from $9.97 on August 31, 1996, and the reinvestment of
$0.451 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.41 per
share, the Fund's distribution rate on August 31, 1997 was 4.42%. The SEC 30-
day yield on that date was 3.84%./3/
. To equal 4.42% in a taxable investment, a couple in the 43.46% combined
federal and state tax bracket would need a yield of 7.82%.
Your Investment at Work
- --------------------------------------------------------------------------------
Jefferson County Health Facilities Revenue Bonds -- University of Louisville
Medical Center Project
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
. The proceeds from these bonds -- issued in the summer of 1997 -- will be used
to help finance major improvements and renovations at the University of
Louisville Medical Center. Areas to be improved include the emergency room,
Cancer Center, and the University Health Center.
. The bonds have good call protection and performance potential, and they
carry triple-A ratings from both the Moody's and Standard & Poor's rating
services due to their insured status.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/23/91. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
Performance/4/
<S> <C>
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 9.1%
Five Year 5.8
Life of Fund (12/23/91) 6.0
- --------------------------------------------------------------------------------
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent
deferred sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 4.1%
Five Year 5.5
Life of Fund (12/23/91) 5.9
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From December 31, 1991, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers EV Marathon Kentucky
Date Municipal Bond Index Fund/CDSC** Municipals Fund
---- -------------------- --------- --------------------
<S> <C> <C> <C>
12/31/91 $10,000 $13,839 $10,000
1/31/92 $10,023 $13,839 $9,840
2/28/92 $10,026 $13,839 $9,919
3/31/92 $10,030 $13,839 $9,863
4/30/92 $10,119 $13,839 $9,976
5/31/92 $10,238 $13,839 $10,160
6/30/92 $10,410 $13,839 $10,359
7/31/92 $10,722 $13,839 $10,761
8/31/92 $10,618 $13,839 $10,527
9/30/92 $10,687 $13,839 $10,545
10/31/92 $10,582 $13,839 $10,261
11/30/92 $10,772 $13,839 $10,611
12/31/92 $10,882 $13,839 $10,726
1/31/93 $11,008 $13,839 $10,843
2/28/93 $11,406 $13,839 $11,328
3/31/93 $11,286 $13,839 $11,150
4/30/93 $11,399 $13,839 $11,300
5/31/93 $11,463 $13,839 $11,377
6/30/93 $11,655 $13,839 $11,589
7/31/93 $11,670 $13,839 $11,563
8/31/93 $11,913 $13,839 $11,782
9/30/93 $12,049 $13,839 $11,921
10/31/93 $12,072 $13,839 $11,938
11/30/93 $11,966 $13,839 $11,802
12/31/93 $12,218 $13,839 $12,080
1/31/94 $12,358 $13,839 $12,203
2/28/94 $12,038 $13,839 $11,832
3/31/94 $11,547 $13,839 $11,172
4/30/94 $11,646 $13,839 $11,246
5/31/94 $11,746 $13,839 $11,343
6/30/94 $11,678 $13,839 $11,207
7/31/94 $11,889 $13,839 $11,454
8/31/94 $11,930 $13,839 $11,471
9/30/94 $11,755 $13,839 $11,231
10/31/94 $11,546 $13,839 $10,921
11/30/94 $11,337 $13,839 $10,641
12/31/94 $11,587 $13,839 $10,958
1/31/95 $11,918 $13,839 $11,387
2/28/95 $12,265 $13,839 $11,756
3/31/95 $12,406 $13,839 $11,858
4/30/95 $12,420 $13,839 $11,849
5/31/95 $12,816 $13,839 $12,218
6/30/95 $12,704 $13,839 $11,999
7/31/95 $12,825 $13,839 $12,073
8/31/95 $12,987 $13,839 $12,229
9/30/95 $13,069 $13,839 $12,302
10/31/95 $13,259 $13,839 $12,535
11/30/95 $13,480 $13,839 $12,792
12/31/95 $13,609 $13,839 $12,927
1/31/96 $13,712 $13,839 $12,976
2/28/96 $13,619 $13,839 $12,812
3/31/96 $13,445 $13,839 $12,646
4/30/96 $13,407 $13,839 $12,608
5/31/96 $13,402 $13,839 $12,605
6/30/96 $13,548 $13,839 $12,746
7/31/96 $13,671 $13,839 $12,815
8/31/96 $13,668 $13,839 $12,774
9/30/96 $13,859 $13,839 $12,965
10/31/96 $14,015 $13,839 $13,076
11/30/96 $14,272 $13,839 $13,254
12/31/96 $14,212 $13,839 $13,239
1/31/97 $14,239 $13,839 $13,274
2/28/97 $14,369 $13,839 $13,407
3/31/97 $14,178 $13,839 $13,267
4/30/97 $14,297 $13,839 $13,354
5/31/97 $14,512 $13,839 $13,534
6/30/97 $14,666 $13,839 $13,679
7/31/97 $15,073 $13,839 $14,034
8/31/97 $14,931 $13,839 $13,939
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.70% of the total dividends paid by the Fund from net investment
during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
6
<PAGE>
EV Marathon Louisiana Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Louisiana's economy has slowed in the past few years, but the outlook is still
brighter than it was during the 1980s. In the last decade, the state's
population showed virtually no increase. Thus far in the 1990s, it has
increased at a modest, but significant, 0.5% annually.
. Louisiana's population increase indicates that the state's economy is indeed
becoming more diversified. Gross state product (GSP), the primary measure of
economic growth, increased 1.3% in 1996. GSP growth is expected to drop
slightly to 1% for 1997 but then rise to 2% in 1998.
. Several economic sectors showed strength in 1996. The oil and gas extraction
industries recovered from a difficult year in 1995, helping to boost personal
incomes. Durable goods, including fabricated metals, electronics, and
transportation equipment, all posted solid gains last year. Business services
led the service sector with growth of 4.4%.
Management Update
- --------------------------------------------------------------------------------
. The past year has generally been a positive and fairly quiet period for the
municipal market overall and in Louisiana. Municipals outperformed Treasuries
in the early part of the 12-month period, then underperformed; they are now
trading at their historically normal range.
. As the Fund has aged, we have been looking for new issues to complement the
existing high-coupon bonds. While these are good for income, they lack the
upside potential we would like. Recently we added some zero coupon bonds,
which gives the Fund the performance upside that it needed.
. The state has quite a few industrial revenue bonds, and, as a result, so does
the Fund. We have added some hospital issues to bring increased diversity.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of 8.5%./1/
This return resulted from an increase in net asset value per share to $10.31
on August 31, 1997 from $9.96 on August 31, 1996, and the reinvestment of
$0.482 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.31 per
share, the Fund's distribution rate on August 31, 1997 was 4.68%. The SEC 30-
day yield on that date was 4.32%./3/
. To equal 4.68% in a taxable investment, a couple in the 39.84% combined
federal and state tax bracket would need a yield of 7.78%.
Your Investment at Work
- --------------------------------------------------------------------------------
State of Louisiana - Orleans Levee District Levee Improvement and Public
Improvement Bonds
[GRAPHIC OF MASONRY APPEARS HERE]
. The Orleans Levee District is responsible for the construction and maintenance
of levees, seawalls, and other hurricane and flood protection structures
surrounding the city of New Orleans.
. This bond issue helped finance a major capital improvement program designed to
enhance the District's existing system of protection from 100-year floods.
. The bonds carry triple-A ratings from both the Standard & Poor's and Moody's
rating services.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 10/2/92. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.5%
Life of Fund (10/2/92) 6.1
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent deferred sales
charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.5%
Life of Fund (10/2/92) 5.8
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From October 31, 1992, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
Louisiana Municipal
Date Municipals Fund Fund/CDSC** Bond Index
- -------- --------------- --------- ---------------
<S> <C> <C> <C>
10/31/92 $10,000 $13,540 $10,000
11/30/92 $10,439 $13,540 $10,179
12/31/92 $10,601 $13,540 $10,283
1/31/93 $10,778 $13,540 $10,403
2/28/93 $11,303 $13,540 $10,779
3/31/93 $11,160 $13,540 $10,665
4/30/93 $11,307 $13,540 $10,773
5/31/93 $11,382 $13,540 $10,833
6/30/93 $11,613 $13,540 $11,014
7/31/93 $11,578 $13,540 $11,028
8/31/93 $11,881 $13,540 $11,258
9/30/93 $12,051 $13,540 $11,386
10/31/93 $12,047 $13,540 $11,408
11/30/93 $11,905 $13,540 $11,308
12/31/93 $12,219 $13,540 $11,546
1/31/94 $12,364 $13,540 $11,678
2/28/94 $11,912 $13,540 $11,376
3/31/94 $11,165 $13,540 $10,913
4/30/94 $11,264 $13,540 $11,005
5/31/94 $11,409 $13,540 $11,100
6/30/94 $11,267 $13,540 $11,036
7/31/94 $11,514 $13,540 $11,235
8/31/94 $11,501 $13,540 $11,274
9/30/94 $11,268 $13,540 $11,108
10/31/94 $10,954 $13,540 $10,911
11/30/94 $10,647 $13,540 $10,714
12/31/94 $10,963 $13,540 $10,950
1/31/95 $11,378 $13,540 $11,263
2/28/95 $11,767 $13,540 $11,590
3/31/95 $11,848 $13,540 $11,723
4/30/95 $11,817 $13,540 $11,737
5/31/95 $12,065 $13,540 $12,112
6/30/95 $11,864 $13,540 $12,006
7/31/95 $11,952 $13,540 $12,119
8/31/95 $12,085 $13,540 $12,273
9/30/95 $12,172 $13,540 $12,351
10/31/95 $12,393 $13,540 $12,530
11/30/95 $12,613 $13,540 $12,739
12/31/95 $12,762 $13,540 $12,861
1/31/96 $12,777 $13,540 $12,958
2/28/96 $12,580 $13,540 $12,870
3/31/96 $12,393 $13,540 $12,706
4/30/96 $12,395 $13,540 $12,670
5/31/96 $12,446 $13,540 $12,665
6/30/96 $12,564 $13,540 $12,803
7/31/96 $12,686 $13,540 $12,919
8/31/96 $12,661 $13,540 $12,916
9/30/96 $12,867 $13,540 $13,097
10/31/96 $12,993 $13,540 $13,245
11/30/96 $13,199 $13,540 $13,487
12/31/96 $13,162 $13,540 $13,430
1/31/97 $13,175 $13,540 $13,456
2/28/97 $13,284 $13,540 $13,579
3/31/97 $13,161 $13,540 $13,398
4/30/97 $13,238 $13,540 $13,510
5/31/97 $13,382 $13,540 $13,714
6/30/97 $13,490 $13,540 $13,860
7/31/97 $13,858 $13,540 $14,244
8/31/97 $13,740 $13,540 $14,110
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.76% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
7
<PAGE>
EV Marathon Maryland Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Maryland's economy benefits from a diversified base, sound financial
operations, and modest debt levels. Employment has been increasing at a 2%
annual rate, a healthy increase over the 1.1% growth logged in 1996.
. Thus far in 1997, Maryland's strengths have been in construction, services,
trade, and government. Manufacturing and FIRE (finance, insurance and real
estate) are down somewhat. Personal income growth lags the nation, but the
state still ranks sixth in the nation on a per capita basis.
. Maryland's state finances are healthy and reflect its strengthening economy.
The state produced an estimated operating surplus of $80 million last year,
bringing its reserves to roughly $675 million. After the 1997-1998 fiscal
year, reserves are expected to drop somewhat to $529 million. In addition,
a 10% income tax cut will be phased in over the next five years.
Management Update
- --------------------------------------------------------------------------------
. This has been a generally positive year for the bond market, with favorable
returns overall. However, the market has been increasingly volatile. Quarterly
price swings often resulted from whether or not economic data confirmed or
negated the so-called "new economy paradigm," which states, in part, that
productivity gains allow growth to continue with low inflation.
. In Maryland, we have reduced our heavy exposure to the hospital sector and
diversified into other areas. Strong demand for hospital bonds has enabled us
to sell selectively at advantageous prices.
. Our goal has been to structure the portfolio into two main components: one
which is high quality, insured, and will provide upside performance; and
another which is higher yielding and provides income and stability in a down
market.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of 8.6%./1/
This return resulted from an increase in net asset value per share to $10.71
on August 31, 1997 from $10.30 on August 31, 1996, and the reinvestment of
$0.462 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.71 per
share, the Fund's distribution rate on August 31, 1997 was 4.31%. The SEC 30-
day yield on that date was 3.88%./3/
. To equal 4.31% in a taxable investment, a couple in the 41.12% combined
federal and state tax bracket would need a yield of 7.32%.
Your Investment at Work
- --------------------------------------------------------------------------------
Maryland Energy Financing Administration Cogeneration Revenue Bonds - Warrior
Run Project
[GRAPHIC OF POWER LINE APPEARS HERE]
. This bond issue helped pay for the construction and ongoing operation of the
180-megawatt, coal-fired electric cogeneration facility located near
Cumberland, Maryland. The bonds carry a high coupon and exemplify the stable,
income-producing component of the Portfolio.
. The project included a transmission line and carbon dioxide production
facility and was constructed jointly by Raytheon Engineers & Constructors,
Inc. and Combustion Engineering, Inc.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect contingent
deferred sales charge (CDSC), deducted at redemption as follows: 5% - 1st and
2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 2/3/92. Index information is available only at month-end; therefore, the line
comparison begins at the next month following the commencement of the Fund's
investment operations. It is not possible to invest directly in the index.
**This figure represents the Fund's performance including applicable contingent
deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.6%
Five Year 5.9
Life of Fund (2/3/92) 6.4
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent
deferred sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.6%
Five Year 5.5
Life of Fund (2/3/92) 6.3
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From February 28, 1992, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman
Maryland Brothers
Municipals Municipal
Date Fund Fund/CDSC Bond Index
- -------- ----------- --------- ----------
<S> <C> <C> <C>
2/28/92 $10,000 $14,049 $10,000
3/31/92 $ 9,999 $14,049 $10,003
4/30/92 $10,098 $14,049 $10,093
5/31/92 $10,238 $14,049 $10,212
6/30/92 $10,432 $14,049 $10,383
7/31/92 $10,871 $14,049 $10,694
8/31/92 $10,648 $14,049 $10,590
9/30/92 $10,676 $14,049 $10,659
10/31/92 $10,320 $14,049 $10,554
11/30/92 $10,665 $14,049 $10,743
12/31/92 $10,830 $14,049 $10,853
1/31/93 $10,987 $14,049 $10,979
2/28/93 $11,434 $14,049 $11,376
3/31/93 $11,277 $14,049 $11,256
4/30/93 $11,425 $14,049 $11,370
5/31/93 $11,500 $14,049 $11,433
6/30/93 $11,721 $14,049 $11,625
7/31/93 $11,674 $14,049 $11,640
8/31/93 $11,946 $14,049 $11,882
9/30/93 $12,128 $14,049 $12,018
10/31/93 $12,134 $14,049 $12,041
11/30/93 $11,966 $14,049 $11,934
12/31/93 $12,258 $14,049 $12,186
1/31/94 $12,402 $14,049 $12,326
2/28/94 $12,003 $14,049 $12,006
3/31/94 $11,252 $14,049 $11,517
4/30/94 $11,281 $14,049 $11,615
5/31/94 $11,401 $14,049 $11,716
6/30/97 $11,279 $14,049 $11,647
7/31/94 $11,535 $14,049 $11,858
8/31/94 $11,576 $14,049 $11,899
9/30/94 $11,328 $14,049 $11,724
10/31/94 $11,011 $14,049 $11,516
11/30/94 $10,678 $14,049 $11,307
12/31/94 $11,049 $14,049 $11,556
1/31/95 $11,449 $14,049 $11,887
2/28/95 $11,894 $14,049 $12,232
3/31/95 $12,007 $14,049 $12,373
4/30/95 $11,974 $14,049 $12,388
5/31/95 $12,361 $14,049 $12,783
6/30/95 $12,087 $14,049 $12,671
7/31/95 $12,184 $14,049 $12,791
8/31/95 $12,352 $14,049 $12,953
9/30/95 $12,426 $14,049 $13,035
10/31/95 $12,682 $14,049 $13,225
11/30/95 $12,963 $14,049 $13,444
12/31/95 $13,134 $14,049 $13,574
1/31/96 $13,235 $14,049 $13,676
2/28/96 $13,051 $14,049 $13,584
3/31/96 $12,839 $14,049 $13,410
4/30/96 $12,804 $14,049 $13,372
5/31/96 $12,791 $14,049 $13,367
6/30/96 $12,919 $14,049 $13,513
7/31/96 $13,039 $14,049 $13,635
8/31/96 $13,024 $14,049 $13,632
9/30/96 $13,240 $14,049 $13,822
10/31/96 $13,337 $14,049 $13,979
11/30/96 $13,553 $14,049 $14,235
12/31/96 $13,501 $14,049 $14,175
1/31/97 $13,486 $14,049 $14,201
2/28/97 $13,618 $14,049 $14,332
3/31/97 $13,429 $14,049 $14,141
4/30/97 $13,555 $14,049 $14,259
5/31/97 $13,748 $14,049 $14,474
6/30/97 $13,879 $14,049 $14,628
7/31/97 $14,243 $14,049 $15,033
8/31/97 $14,149 $14,049 $14,892
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.70% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
8
<PAGE>
EV Marathon Missouri Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON APPEARS HERE]
Cynthia J. Clemson,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Missouri is fortunate to have a diversified economy, with strengths in
manufacturing, telecommunications, high technology, retail and health care.
. Missouri's economic strength is reflected in personal income, which grew an
average of 5.9% over the past two years and is expected to grow by 4.4% this
year. Annual employment growth has recently been in excess of 4%.
. Examples of Missouri's strong economy can be found in several industries.
Kansas City has attracted Gateway 2000 and Electronic Data Systems - leaders
in the computer industry - which are planning major expansions over the next
few years.
. In telecommunications, over 1000 new jobs will result from a joint venture led
by Sprint Corp. and Telecommunications, Inc. In manufacturing, the state has
large employers in the Big Three automakers and the military aircraft division
of Boeing/McDonnell Douglas.
Management Update
- --------------------------------------------------------------------------------
. Municipal issuance at the state level has been fairly low this past year, and
Missouri's municipal market was no exception. As a result, we focused our
efforts in sectors where issuance was higher.
. One sector where we found higher issuance was in industrial development
revenue (IDR) bonds. IDRs tend to provide higher yields and are a good way to
diversify the holdings. We also continually seek discount bonds, which perform
well in a market rally.
. St. Louis has been emerging from a difficult financial situation, and several
holdings in the Fund backed by St. Louis-based entities will continue to
benefit. One indicator of St. Louis's recovery was its refunding of a
convention center issue.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of 9.4%./1/
This return resulted from an increase in net asset value per share to $11.01
on August 31, 1997 from $10.51 on August 31, 1996, and the reinvestment of
$0.471 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $11.01 per
share, the Fund's distribution rate on August 31, 1997 was 4.28%. The SEC 30-
day yield on that date was 4.18%./3/
. To equal 4.28% in a taxable investment, a couple in the 39.84% combined
federal and state tax bracket would need a yield of 7.11%.
Your Investment at Work
- --------------------------------------------------------------------------------
Kansas City Industrial Development
Authority -- Air Cargo Facility Senior
Revenue Bonds
[GRAPHIC OF AIRPLANE APPEARS HERE]
. The proceeds from this bond issue financed a major renovation and construction
project at the Kansas City International Airport in Kansas City, Missouri.
. The project included renovating a 60,000 square foot air cargo warehouse and
constructing a 180,300 square foot aircraft parking ramp and 50,000 square
feet of additional aircraft taxi lanes.
. The bonds are an excellent example of a high-yielding Portfolio component
providing an essential municipal service to the residents of Kansas City.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 5/1/92. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 9.4%
Five Year 6.3
Life of Fund (5/1/92) 7.1
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent deferred sales
charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 4.4%
Five Year 6.0
Life of Fund (5/1/92) 6.9
</TABLE>
[LINE GRAPH APPEARS HERE]
Comparison of Change in Value of a $10,000 investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From May 31, 1992, through August 31, 1997
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
Missouri Municipal
Date Municipals Fund Fund/CDSC** Bond Index
<S> <C> <C> <C>
5/31/92 $10,000 $14,150 $10,000
6/30/92 $10,245 $14,150 $10,168
7/31/92 $10,635 $14,150 $10,473
8/31/92 $10,480 $14,150 $10,370
9/30/92 $10,528 $14,150 $10,438
10/31/92 $10,192 $14,150 $10,336
11/30/92 $10,593 $14,150 $10,521
12/31/92 $10,722 $14,150 $10,628
1/31/93 $10,857 $14,150 $10,752
2/28/93 $11,379 $14,150 $11,141
3/31/93 $11,259 $14,150 $11,023
4/30/93 $11,395 $14,150 $11,134
5/31/93 $11,481 $14,150 $11,197
6/30/93 $11,679 $14,150 $11,384
7/31/93 $11,645 $14,150 $11,398
8/31/93 $11,913 $14,150 $11,636
9/30/93 $12,071 $14,150 $11,769
10/31/93 $12,057 $14,150 $11,791
11/30/93 $11,894 $14,150 $11,687
12/31/93 $12,175 $14,150 $11,934
1/31/94 $12,317 $14,150 $12,070
2/28/94 $11,938 $14,150 $11,758
3/31/94 $11,236 $14,150 $11,279
4/30/94 $11,276 $14,150 $11,374
5/31/94 $11,395 $14,150 $11,473
6/30/94 $11,310 $14,150 $11,406
7/31/94 $11,540 $14,150 $11,612
8/31/94 $11,548 $14,150 $11,652
9/30/94 $11,307 $14,150 $11,481
10/31/94 $10,997 $14,150 $11,277
11/30/94 $10,683 $14,150 $11,073
12/31/94 $11,037 $14,150 $11,317
1/31/95 $11,477 $14,150 $11,641
2/28/95 $11,892 $14,150 $11,979
3/31/95 $11,981 $14,150 $12,117
4/30/95 $11,996 $14,150 $12,131
5/31/95 $12,425 $14,150 $12,518
6/30/95 $12,226 $14,150 $12,409
7/31/95 $12,275 $14,150 $12,526
8/31/95 $12,451 $14,150 $12,685
9/30/95 $12,523 $14,150 $12,765
10/31/95 $12,749 $14,150 $12,951
11/30/95 $13,024 $14,150 $13,166
12/31/95 $13,180 $14,150 $13,292
1/31/96 $13,266 $14,150 $13,393
2/28/96 $13,085 $14,150 $13,302
3/31/96 $12,828 $14,150 $13,132
4/30/96 $12,781 $14,150 $13,095
5/31/96 $12,780 $14,150 $13,090
6/30/96 $12,918 $14,150 $13,233
7/31/96 $13,049 $14,150 $13,353
8/31/96 $13,023 $14,150 $13,350
9/30/96 $13,248 $14,150 $13,536
10/31/96 $13,382 $14,150 $13,689
11/30/96 $13,607 $14,150 $13,940
12/31/96 $13,544 $14,150 $13,881
1/31/97 $13,543 $14,150 $13,907
2/28/97 $13,699 $14,150 $14,035
3/31/97 $13,502 $14,150 $13,848
4/30/97 $13,613 $14,150 $13,964
5/31/97 $13,829 $14,150 $14,174
6/30/97 $13,958 $14,150 $14,325
7/31/97 $14,367 $14,150 $14,722
8/31/97 $14,250 $14,150 $14,584
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.23% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
9
<PAGE>
EV Marathon North Carolina Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTOGRAPH OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. North Carolina boasts one of the most dynamic economies in the southeastern
U.S., thanks to a business-friendly political climate, an educated workforce,
and an increasing population. The economy's diversity is another positive
factor.
. After several years of solid growth, North Carolina's economy slowed somewhat
in 1996 as its manufacturing sector declined. Nevertheless, gross state
product (GSP) increased 2.7% last year, and a rebound in manufacturing in 1997
will bring GSP growth to the 4% level, according to estimates. GSP is expected
to increase 4% in 1998 as well.
. Strong sectors include financial services, which grew 5.5% in 1996 and is led
by a thriving banking industry, and tourism, which also had a good year in
1996. Government spending remains strong, as the state has been spared much of
the military downsizing afflicting other states in the region.
Management Update
- --------------------------------------------------------------------------------
. The past year has generally been a positive and fairly quiet period for the
municipal market overall. Municipals outperformed Treasuries in the early part
of the 12-month period, then underperformed; they are now trading within their
historically normal range.
. North Carolina is fortunate to have a large number of high-quality bonds --
both in the secondary and new issue markets. There are also quite a few
hospital bonds, which is reflected in their large percentage in the Fund.
. To increase performance, we have added zero coupon bonds. We have also swapped
out of bonds with shorter calls into longer-call bonds -- this should also
enhance the Fund's performance.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of 8.5%./1/
This return resulted from an increase in net asset value per share to $10.34
on August 31, 1997 from $9.97 on August 31, 1996, and the reinvestment of
$0.460 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.34 per
share, the Fund's distribution rate on August 31, 1997 was 4.45%. The SEC 30-
day yield on that date was 3.98%./3/
. To equal 4.45% in a taxable investment, a couple in the 40.96% combined
federal and state tax bracket would need a yield of 7.54%.
Your Investment at Work
- --------------------------------------------------------------------------------
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
County of Pitt, North Carolina -- Pitt County Memorial Hospital Revenue Bonds
. This bond issue helped finance significant construction projects at the Pitt
County Memorial Hospital, a 711-bed facility serving 29 eastern North Carolina
counties. The hospital is affiliated with the East Carolina University School
of Medicine, which is adjacent to the hospital.
. Improvements included constructing and equipping a new support services
building and an expansion to the hospital's rehabilitation facilities, and
equipping and renovating the hospital's diagnostic, nursing and information
services departments.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 10/23/91. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.5%
Five Year 5.2
Life of Fund (10/23/91) 5.9
SEC Average Annual Total Returns (including applicable
contingent deferred sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.5%
Five Year 4.8
Life of Fund (10/23/91) 5.8
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index From October 31, 1991 through August 31, 1997
[LINE GRAPH APPEARS HERE]
EV Marathon North Carolina Municipals Fund vs. Lehman Brothers 7-Year Municipal
Bond Index
<TABLE>
<CAPTION>
Lehman
EV Marathon Brothers
North Carolina Municipal Bond
Date Municipal Fund Fund/CDSC Index
- -------- -------------- --------- --------------
<S> <C> <C> <C>
10/31/91 $10,000 $13,854 $10,000
11/30/91 $9,920 $13,854 $10,028
12/31/91 $10,226 $13,854 $10,243
1/31/92 $10,208 $13,854 $10,266
2/28/92 $10,217 $13,854 $10,270
3/31/92 $10,214 $13,854 $10,273
4/30/92 $10,307 $13,854 $10,365
5/31/92 $10,474 $13,854 $10,487
6/30/92 $10,695 $13,854 $10,663
7/31/92 $11,111 $13,854 $10,983
8/31/92 $10,845 $13,854 $10,876
9/30/92 $10,843 $13,854 $10,947
10/31/92 $10,525 $13,854 $10,839
11/30/92 $10,899 $13,854 $11,033
12/31/92 $11,052 $13,854 $11,146
1/31/93 $11,171 $13,854 $11,276
2/28/93 $11,606 $13,854 $11,683
3/31/93 $11,426 $13,854 $11,560
4/30/93 $11,567 $13,854 $11,676
5/31/93 $11,634 $13,854 $11,742
6/30/93 $11,827 $13,854 $11,938
7/31/93 $11,790 $13,854 $11,954
8/31/93 $12,089 $13,854 $12,203
9/30/93 $12,219 $13,854 $12,342
10/31/93 $12,192 $13,854 $12,366
11/30/93 $12,043 $13,854 $12,256
12/31/93 $12,321 $13,854 $12,515
1/31/94 $12,468 $13,854 $12,658
2/28/94 $12,107 $13,854 $12,330
3/31/94 $11,445 $13,854 $11,828
4/30/94 $11,497 $13,854 $11,929
5/31/94 $11,573 $13,854 $12,032
6/30/94 $11,449 $13,854 $11,962
7/31/94 $11,651 $13,854 $12,178
8/31/94 $11,681 $13,854 $12,220
9/30/94 $11,488 $13,854 $12,041
10/31/94 $11,188 $13,854 $11,827
11/30/94 $10,849 $13,854 $11,613
12/31/94 $11,180 $13,854 $11,868
1/31/95 $11,577 $13,854 $12,208
2/28/95 $11,947 $13,854 $12,563
3/31/95 $12,064 $13,854 $12,707
4/30/95 $12,042 $13,854 $12,722
5/31/95 $12,341 $13,854 $13,128
6/30/95 $12,122 $13,854 $13,013
7/31/95 $12,160 $13,854 $13,136
8/31/95 $12,269 $13,854 $13,303
9/30/95 $12,354 $13,854 $13,387
10/31/95 $12,626 $13,854 $13,582
11/30/95 $12,911 $13,854 $13,807
12/31/95 $13,047 $13,854 $13,940
1/31/96 $13,085 $13,854 $14,045
2/28/96 $12,920 $13,854 $13,950
3/31/96 $12,715 $13,854 $13,772
4/30/96 $12,715 $13,854 $13,733
5/31/96 $12,700 $13,854 $13,728
6/30/96 $12,805 $13,854 $13,878
7/31/96 $12,889 $13,854 $14,003
8/31/96 $12,861 $13,854 $14,000
9/30/96 $13,068 $13,854 $14,196
10/31/96 $13,167 $13,854 $14,356
11/30/96 $13,387 $13,854 $14,619
12/31/96 $13,308 $13,854 $14,557
1/31/97 $13,305 $13,854 $14,585
2/28/97 $13,413 $13,854 $14,719
3/31/97 $13,233 $13,854 $14,522
4/30/97 $13,348 $13,854 $14,644
5/31/97 $13,558 $13,854 $14,865
6/30/97 $13,692 $13,854 $15,023
7/31/97 $14,130 $13,854 $15,439
8/31/97 $13,954 $13,854 $15,294
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 97.56% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
10
<PAGE>
EV Marathon Oregon Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF THOMAS M. METZOLD APPEARS HERE]
Thomas M. Metzold,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Oregon's economy has reflected that of the U.S., with strong growth
accompanied by low unemployment. As the state has become less dependent on
the timber industry and has benefited from an in-migration of new residents
from California, its employment has increased significantly.
. Most of Oregon's new jobs have been in the nonmanufacturing and service
sectors, which grew 4.2% and 6% in 1996, respectively. The service sector now
accounts for over 26% of nonagricultural employment.
. Oregon has seen a surge in high-technology jobs, due to its attractive
geography for locating facilities and an abundant water supply, which is
necessary for the manufacture of computer chips. High-technology accounted
for 17.6% of total manufacturing employment in early 1997.
Management Update
- --------------------------------------------------------------------------------
. The bond market has provided investors with solid returns over the past year,
as people have become more comfortable with the "Goldilocks economy"--i.e.,
growth which is neither too fast nor too slow. With the tremendous run-up in
equity prices, the case for municipal bonds remains as strong as ever.
. Oregon voters recently passed Measure 50, which will limit growth of property
taxes but will ensure that vital services are still funded by the government.
This should not have a major impact on the state's bonds, but we will
continue to diversify to minimize any potential impact down the road.
. Our diversification strategy aims to steer away from the largest segment of
Oregon's municipal bond market--namely, GOs and single family housing bonds.
We have had success with multi-family housing bonds, which offer better call
protection and total return potential than single family housing bonds.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
7.2%./1/ This return resulted from an increase in net asset value per share
to $10.51 on August 31, 1997 from $10.24 on August 31, 1996, and the
reinvestment of $0.452 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.51 per
share, the Fund's distribution rate on August 31, 1997 was 4.30%. The SEC 30-
day yield on that date was 3.94%./3/
. To equal 4.30% in a taxable investment, a couple in the 41.76% combined
federal and state tax bracket would need a yield of 7.38%.
Your Investment at Work
- --------------------------------------------------------------------------------
[RAILROAD GRAPHIC APPEARS HERE]
Oregon Department of Transportation--Regional Light Rail Extension
Construction Fund Revenue Bonds
. This issue will finance the construction of the Westside light rail extension
project, which will extend Portland's light rail system into the city's
western suburbs by 18 miles. It will connect with the existing light rail
system, which extends 15 miles to Portland's eastern suburbs.
. The bonds will be funded by federal, state, and local governments. A portion
of the state's share will be backed by the Oregon Lottery.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 12/24/91. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 7.2%
Five Year 5.6
Life of Fund (12/24/91) 6.1
SEC Average Annual Total Returns (including applicable contingent
deferred sales charge)
- --------------------------------------------------------------------------------
One Year 2.2%
Five Year 5.3
Life of Fund (12/24/91) 6.0
- --------------------------------------------------------------------------------
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index(TM) From December 31, 1991, through August 31,
1997
<TABLE>
<CAPTION>
EV Marathon Fund/ Lehman Brothers
Oregon Contingent Deferred Municipal
Date Mutuals Fund Sales Charge Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/91 $10,000 $13,910 $10,000
1/31/92 $9,990 $13,910 $10,023
2/28/92 $10,054 $13,910 $10,026
3/31/92 $10,028 $13,910 $10,030
4/30/92 $10,148 $13,910 $10,119
5/31/92 $10,331 $13,910 $10,238
6/30/92 $10,506 $13,910 $10,410
7/31/92 $10,866 $13,910 $10,722
8/31/92 $10,682 $13,910 $10,618
9/30/92 $10,710 $13,910 $10,687
10/31/92 $10,404 $13,910 $10,582
11/30/92 $10,772 $13,910 $10,772
12/31/92 $10,943 $13,910 $10,882
1/31/93 $11,102 $13,910 $11,008
2/28/93 $11,551 $13,910 $11,406
3/31/93 $11,469 $13,910 $11,286
4/30/93 $11,586 $13,910 $11,399
5/31/93 $11,662 $13,910 $11,463
6/30/93 $11,874 $13,910 $11,655
7/31/93 $11,903 $13,910 $11,670
8/31/93 $12,165 $13,910 $11,913
9/30/93 $12,259 $13,910 $12,049
10/31/93 $12,254 $13,910 $12,072
11/30/93 $12,128 $13,910 $11,966
12/31/93 $12,405 $13,910 $12,218
1/31/94 $12,562 $13,910 $12,358
2/28/94 $12,192 $13,910 $12,038
3/31/94 $11,488 $13,910 $11,547
4/30/94 $11,539 $13,910 $11,646
5/31/94 $11,625 $13,910 $11,746
6/30/94 $11,502 $13,910 $11,678
7/31/94 $11,714 $13,910 $11,889
8/31/94 $11,743 $13,910 $11,930
9/30/94 $11,481 $13,910 $11,755
10/31/94 $11,171 $13,910 $11,546
11/30/94 $10,857 $13,910 $11,337
12/31/94 $11,232 $13,910 $11,587
1/31/95 $11,660 $13,910 $11,918
2/28/95 $12,098 $13,910 $12,265
3/31/95 $12,176 $13,910 $12,406
4/30/95 $12,166 $13,910 $12,420
5/31/95 $12,558 $13,910 $12,186
6/30/95 $12,351 $13,910 $12,704
7/31/95 $12,412 $13,910 $12,825
8/31/95 $12,591 $13,910 $12,987
9/30/95 $12,663 $13,910 $13,069
10/31/95 $12,883 $13,910 $13,259
11/30/95 $13,115 $13,910 $13,480
12/31/95 $13,249 $13,910 $13,609
1/31/96 $13,310 $13,910 $13,712
2/28/96 $13,159 $13,910 $13,619
3/31/96 $12,968 $13,910 $13,445
4/30/96 $12,942 $13,910 $13,407
5/31/96 $12,939 $13,910 $13,402
6/30/96 $13,054 $13,910 $13,548
7/31/96 $13,123 $13,910 $13,671
8/31/96 $13,070 $13,910 $13,668
9/30/96 $13,261 $13,910 $13,859
10/31/96 $13,345 $13,910 $14,015
11/30/96 $13,510 $13,910 $14,272
12/31/96 $13,469 $13,910 $14,212
1/31/97 $13,414 $13,910 $14,239
2/28/97 $13,546 $13,910 $14,369
3/31/97 $13,394 $13,910 $14,178
4/30/97 $13,454 $13,910 $14,297
5/31/97 $13,608 $13,910 $14,512
6/30/97 $13,713 $13,910 $14,666
7/31/97 $14,052 $13,910 $15,073
8/31/97 $14,010 $13,910 $14,931
</TABLE>
Federal income tax information on distributions: For federal income tax
purposes, 99.54% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
11
<PAGE>
EV Marathon South Carolina Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. South Carolina's economy posted solid growth in 1996 despite some weakness
in the manufacturing sector and the impact of base closings due to military
cutbacks. Gross state product (GSP) increased 3.2%, while payroll
employment rose 1.9%. GSP had increased 4.2% in 1995.
. Several sectors of the state's economy - including business services,
health care, and transportation equipment - continued to perform well,
reflecting an increasingly diversified base. Along the coast, tourism
continues to expand and the Port of Charleston has benefited from an
increase in regional exports. The financial services industry had its best
year of the decade in 1996 with growth of 3.5%.
. Manufacturing is recovering in 1997, and this is expected to increase GSP
growth to 3.4% for the year. A forecasted slowdown in the national economy
will bring GSP growth back to the 3% level in 1998, according to estimates.
Management Update
- --------------------------------------------------------------------------------
. The past year has generally been a positive, stable and fairly quiet period
for the municipal market. Municipals outperformed treasuries in the early
part of the 12-month period, then underperformed; they are now trading at
their historically normal range.
. The state government's Jobs Program - a unique plan in which basic services
jobs are financially supported by municipal bond issues - has been a
tremendous success both for South Carolina's residents and for municipal
bond holders. The Fund has several issues supporting this effort.
. We continue to seek ways to reduce the impact of market downswings by
combining high-yielding, lower-rated bonds with high-quality, insured
holdings.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
8.4%./1/ This return resulted from an increase in net asset value per share
to $10.38 on August 31, 1997 from $10.02 on August 31, 1996, and the
reinvestment of $0.467 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.38
per share, the Fund's distribution rate on August 31, 1997 was 4.50%. The
SEC 30-day yield on that date was 4.12%./3/
. To equal 4.50% in a taxable investment, a couple in the 40.48% combined
federal and state tax bracket would need a yield of 7.56%.
Your Investment at Work
- --------------------------------------------------------------------------------
South Carolina Housing Finance and Development Authority - Mortgage Revenue
Bonds
[GRAPHIC OF HOUSING APPEARS HERE]
. The proceeds from this bond issue will be used to provide mortgage loans
for single family residences in South Carolina.
. The Authority was created in 1971 as part of the Housing Authorities Law of
South Carolina to make it easier for South Carolina families to obtain
housing.
. The bonds carry triple-A ratings from both the Standard & Poor's and
Moody's rating services.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 10/2/92. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.4%
Life of Fund (10/2/92) 5.8
<CAPTION>
SEC Average Annual Total Returns (including applicable contingent deferred sales
charge)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.4%
Life of Fund (10/2/92) 5.4
</TABLE>
Comparison of Change in Value of $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From October 31, 1992, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon South Carolina Lehman Brothers
Date Municipals Fund Fund/CDSC** Municipal Bond Index
---- -------------------------- ----------- --------------------
<S> <C> <C> <C>
10/31/92 $10,000 $13,245 $10,000
11/30/92 $10,286 $13,245 $10,179
12/31/92 $10,434 $13,245 $10,283
1/31/93 $10,577 $13,245 $10,403
2/28/93 $11,065 $13,245 $10,779
3/31/93 $10,941 $13,245 $10,665
4/30/93 $11,064 $13,245 $10,773
5/31/93 $11,115 $13,245 $10,833
6/30/93 $11,268 $13,245 $11,014
7/31/93 $11,264 $13,245 $11,028
8/31/93 $11,540 $13,245 $11,258
9/30/93 $11,696 $13,245 $11,386
10/31/93 $11,680 $13,245 $11,408
11/30/93 $11,536 $13,245 $11,308
12/31/93 $11,834 $13,245 $11,546
1/31/94 $11,941 $13,245 $11,678
2/28/94 $11,571 $13,245 $11,376
3/31/94 $10,912 $13,245 $10,913
4/30/94 $10,983 $13,245 $11,005
5/31/94 $11,055 $13,245 $11,100
6/30/94 $10,957 $13,245 $11,036
7/31/94 $11,162 $13,245 $11,235
8/31/94 $11,189 $13,245 $11,274
9/30/94 $11,003 $13,245 $11,108
10/31/94 $10,714 $13,245 $10,911
11/30/94 $10,409 $13,245 $10,714
12/31/94 $10,692 $13,245 $10,950
1/31/95 $11,059 $13,245 $11,263
2/28/95 $11,402 $13,245 $11,590
3/31/95 $11,535 $13,245 $11,723
4/30/95 $11,501 $13,245 $11,737
5/31/95 $11,810 $13,245 $12,112
6/30/95 $11,634 $13,245 $12,006
7/31/95 $11,670 $13,245 $12,119
8/31/95 $11,820 $13,245 $12,273
9/30/95 $11,891 $13,245 $12,351
10/31/95 $12,127 $13,245 $12,530
11/30/95 $12,400 $13,245 $12,739
12/31/95 $12,542 $13,245 $12,861
1/31/96 $12,602 $13,245 $12,958
2/28/96 $12,420 $13,245 $12,870
3/31/96 $12,236 $13,245 $12,706
4/30/96 $12,187 $13,245 $12,670
5/31/96 $12,196 $13,245 $12,665
6/30/96 $12,334 $13,245 $12,803
7/31/96 $12,477 $13,245 $12,919
8/31/96 $12,401 $13,245 $12,916
9/30/96 $12,600 $13,245 $13,097
10/31/96 $12,734 $13,245 $13,245
11/30/96 $12,933 $13,245 $13,487
12/31/96 $12,857 $13,245 $13,430
1/31/97 $12,893 $13,245 $13,456
2/28/97 $13,011 $13,245 $13,579
3/31/97 $12,852 $13,245 $13,398
4/30/97 $12,924 $13,245 $13,510
5/31/97 $13,114 $13,245 $13,714
6/30/97 $13,243 $13,245 $13,860
7/31/97 $13,548 $13,245 $14,244
8/31/97 $13,445 $13,245 $14,110
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.32% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
12
<PAGE>
EV Marathon Tennessee Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON, PORTFOLIO MANAGER APPEARS HERE]
The Economy
- --------------------------------------------------------------------------------
. Tennessee's economy slowed in 1996 from a strong pace the previous three
years that was led by the manufacturing sector. Manufacturing slowed last
year in several industries, but the biggest impact was in apparels, where
over 7,000 jobs were lost.
. Despite the slowdown of 1996, Tennessee's gross state product (GSP) managed
to post solid growth of 2.8%, thanks to growth in the financial, tourism,
health care, and construction sectors.
. Unemployment continues to be very low in Tennessee, which has had a mixed
effect on the economy. On the one hand, it has been a hindrance to economic
growth; on the other, it helps draw people into the state. In 1996, the
unemployment rate dropped below 4%.
. The manufacturing sector is beginning to recover, which should increase GSP
growth to an estimated 3.8% in 1997 and 3.6% in 1998.
Management Update
- --------------------------------------------------------------------------------
. Municipal issuance at the state level has been fairly low this past year, and
Tennessee's municipal market was no exception. As a result, we focused our
efforts in sectors where issuance was higher.
. The hospital sector in Tennessee had higher-than-usual issuance, which gave
us a wider variety of call features and coupon characteristics to choose
from. This allowed us not only to buy bonds which were undervalued due to
ample supply, but also to improve the call protection of the Fund, which
should enhance the Fund's performance over the long term.
. We continue to seek high quality non-rated bonds, which offer additional
yield without taking on significant risk. The Hardeman County Correctional
Facilities issue highlighted in this report is an excellent example.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
9.0%./1/ This return resulted from an increase in net asset value per share
to $10.58 on August 31, 1997 from $10.15 on August 31, 1996, and the
reinvestment of $0.459 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.58 per
share, the Fund's distribution rate on August 31, 1997 was 4.30%. The SEC 30-
day yield on that date was 3.87%./3/
. To equal 4.30% in a taxable investment, a couple in the 39.84% combined
federal and state tax bracket would need a yield of 7.15%.
[LAW ENFORCEMENT GRAPHIC APPEARS HERE]
Your Investment at Work
- --------------------------------------------------------------------------------
Hardeman County Correctional Facilities Corporation Revenue Bonds, Ser. 1997
. These bonds were issued to finance the development and construction of a
1,504-bed prison in Hardeman County, TN. The prison, once constructed, will
be managed by Corrections Corp. of America (CCA), the largest private prison
management company in the U.S. with over 59 facilities nationwide.
. In addition to a first mortgage on the facility and gross revenues of the
prison, repayment on the bonds is further secured by a debt service agreement
with CCA, through which CCA will make payments on the bonds in the event
facility revenues are insufficient.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales charge
(CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the net asset value at the end of the period
and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 8/25/92. Index information is available only at month-end; therefore, the
line comparison begins at the next month following the commencement of the
Fund's investment operations. It is not possible to invest directly in the
index.
** This figure represents the Fund's performance including applicable
contingent deferred sales charge (CDSC).
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/4/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 9.0%
Five Year 6.4
Life of Fund (8/25/92) 6.4
SEC Average Annual Total Returns (including applicable contingent deferred
sales charge)
- --------------------------------------------------------------------------------
One Year 4.0%
Five Year 6.1
Life of Fund (8/25/92) 6.3
</TABLE>
[LINE CHART APPEARS HERE]
Comparison of Change In Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index*
From August 31, 1992, through August 31, 1997
<TABLE>
<CAPTION>
EV Marathon
Tennessee Lehman Brothers
Date Municipals Fund Fund/CDSC** Municipal Bond Index
- ---- --------------- --------- --------------------
<S> <C> <C> <C>
08/31/92 $10,000 $13,521 $10,000
09/30/92 $9,970 $13,521 $10,065
10/31/92 $9,709 $13,521 $9,966
11/30/92 $10,110 $13,521 $10,145
12/31/92 $10,276 $13,521 $10,249
01/31/93 $10,437 $13,521 $10,368
02/28/93 $10,865 $13,521 $10,743
03/31/93 $10,733 $13,521 $10,629
04/30/93 $10,906 $13,521 $10,736
05/31/93 $11,008 $13,521 $10,797
06/30/93 $11,242 $13,521 $10,977
07/31/93 $11,238 $13,521 $10,991
08/31/93 $11,520 $13,521 $11,220
09/30/93 $11,662 $13,521 $11,348
10/31/93 $11,657 $13,521 $11,370
11/30/93 $11,505 $13,521 $11,270
12/31/93 $11,767 $13,521 $11,508
01/31/94 $11,917 $13,521 $11,639
02/28/94 $11,551 $13,521 $11,338
03/31/94 $10,876 $13,521 $10,876
04/30/94 $10,904 $13,521 $10,968
05/31/94 $11,021 $13,521 $11,063
06/30/94 $10,914 $13,521 $10,999
07/31/94 $11,174 $13,521 $11,197
08/31/94 $11,203 $13,521 $11,236
09/30/94 $10,963 $13,521 $11,071
10/31/94 $10,633 $13,521 $10,874
11/30/94 $10,309 $13,521 $10,678
12/31/94 $10,637 $13,521 $10,913
01/31/95 $11,073 $13,521 $11,225
02/28/95 $11,485 $13,521 $11,551
03/31/95 $11,550 $13,521 $11,684
04/30/95 $11,518 $13,521 $11,698
05/31/95 $11,862 $13,521 $12,071
06/30/95 $11,642 $13,521 $11,965
07/31/95 $11,714 $13,521 $12,079
08/31/95 $11,889 $13,521 $12,232
09/30/95 $11,960 $13,521 $12,309
10/31/95 $12,197 $13,521 $12,488
11/30/95 $12,469 $13,521 $12,696
12/31/95 $12,648 $13,521 $12,817
01/31/96 $12,673 $13,521 $12,914
02/28/96 $12,517 $13,521 $12,827
03/31/96 $12,335 $13,521 $12,663
04/30/96 $12,311 $13,521 $12,627
05/31/96 $12,322 $13,521 $12,622
06/30/96 $12,435 $13,521 $12,760
07/31/96 $12,522 $13,521 $12,876
08/31/96 $12,502 $13,521 $12,873
09/30/96 $12,700 $13,521 $13,053
10/31/96 $12,820 $13,521 $13,200
11/30/96 $13,030 $13,521 $13,442
12/31/96 $12,980 $13,521 $13,385
01/31/97 $12,978 $13,521 $13,410
02/28/97 $13,094 $13,521 $13,534
03/31/97 $12,936 $13,521 $13,353
04/30/97 $13,058 $13,521 $13,465
05/31/97 $13,232 $13,521 $13,668
06/30/97 $13,359 $13,521 $13,813
07/31/97 $13,725 $13,521 $14,196
08/31/97 $13,621 $13,521 $14,063
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.65% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
13
<PAGE>
EV Marathon Virginia Municipals Fund as of August 31, 1997
INVESTMENT UPDATE
[PHOTO OF TIMOTHY T. BROWSE APPEARS HERE]
Timothy T. Browse
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Virginia, like many states in the southeastern U.S. region, experienced a
decline in the manufacturing sector of its economy in 1996. This weakness,
along with the ongoing impact of military base closings in the state, slowed
the growth of Virginia's gross state product (GSP) to 2.9% last year.
. Through the end of 1996 and into 1997, manufacturing began to stabilize and
leading indicators predict a strengthening. Analysts expect an increase in
GSP growth to 3.1% this year with growth in 1998 of 2.7%.
. Other sectors of Virginia's economy maintained strength last year, including
chemicals, paper, construction, retailing, financial and business services,
and health care.
. Virginia's population has grown at an average annual pace of 1.2% in the
1990s. In the 1980s this rate was slightly higher, at 1.5%.
Management Update
- --------------------------------------------------------------------------------
. This has been a generally positive year for the bond market, with favorable
returns overall. However, the market has been increasingly volatile.
Quarterly price swings often resulted from whether or not economic data
confirmed or negated the so-called "new economy paradigm," which states, in
part, that productivity gains allow growth to continue with low inflation.
. In the Virginia Fund, we have worked to structure the portfolio to reduce the
impact of market downswings and to enhance performance in a market rally. To
effect this, we combined high-yielding, lower-rated bonds with high-quality,
insured holdings.
. We have replaced less desirable holdings of "AA"-rated bonds with either "A"-
rated bonds -- which are higher yielding and perform similarly or -- "AAA"-
rated insured bonds, which may offer less yield but tend to perform better.
The Fund
- --------------------------------------------------------------------------------
. During the year ended August 31, 1997, the Fund had a total return of
8.3%./1/ This return resulted from an increase in net asset value per share
to $10.63 on August 31, 1997 from $10.26 on August 31, 1996, and the
reinvestment of $0.466 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.63 per
share, the Fund's distribution rate on August 31, 1997 was 4.38%. The SEC 30-
day yield on that date was 4.08%./3/
. To equal 4.38% in a taxable investment, a couple in the 39.68% combined
federal and state tax bracket would need a yield of 7.26%.
[GRAPHIC OF HYDRO APPEARS HERE]
Your Investment at Work
- --------------------------------------------------------------------------------
Industrial Development Authority of the County of James City -- Sewage and
Solid Waste Disposal Facilities Revenue Bonds -- Anheuser Busch Project
. These bonds will help finance the construction of solid waste disposal
facilities serving a major brewery operated by Anheuser Busch Companies, Inc.
as well as similar facilities serving Busch Gardens and Water Country,
operated by Busch Entertainment, Inc.
. The high-yielding bonds are backed by Anheuser Busch, Inc., the world's
largest brewer of beer and a parent corporation to a number of subsidiaries
involved in several related businesses.
- --------------------------------------------------------------------------------
/1/ This return does not include the maximum 5% contingent deferred sales
charge (CDSC).
/2/ A portion of the Fund's income may be subject to federal and state income
taxes and/or federal alternative minimum tax.
/3/ The Fund's SEC yield is calculated by dividing the net investment income
per share for the 30-day period by the net asset value at the end of the
period and annualizing the result.
/4/ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC Returns reflect
contingent deferred sales charge (CDSC), deducted at redemption as follows:
5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% -
6th year. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
on 7/26/91. Index information is available only at month-end; therefore,
the line comparison begins at the next month following the commencement of
the Fund's investment operations. It is not possible to invest directly in
the index.
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
Performance/4/
- -------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- -------------------------------------------------
<S> <C>
One Year 8.3%
Five Year 5.4
Life of Fund (7/26/91) 6.5
<CAPTION>
SEC Average Annual Total Returns (including
applicable contingent deferred sales charge)
- -------------------------------------------------
<S> <C>
One Year 3.3%
Five Year 5.1
Life of Fund (7/26/91) 6.5
</TABLE>
Comparison of Change in Value of a $10,000 Investment in
the Fund vs. the Lehman Brothers Municipal Bond Index*
From July 31, 1991, through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date EV Marathon Virginia Municipals Fund Lehman Brothers Municipal Bond Index
<S> <C> <C>
07/31/91 $10,000 $10,000
08/31/91 $10,080 $10,132
09/30/91 $10,262 $10,264
10/31/91 $10,374 $10,356
11/30/91 $10,369 $10,385
12/31/91 $10,655 $10,608
01/31/92 $10,606 $10,632
02/28/92 $10,618 $10,636
03/31/92 $10,564 $10,639
04/30/92 $10,681 $10,734
05/31/92 $10,830 $10,861
06/30/92 $11,036 $11,043
07/31/92 $11,440 $11,374
08/31/92 $11,224 $11,263
09/30/92 $11,202 $11,337
10/31/92 $10,892 $11,225
11/30/92 $11,285 $11,426
12/31/92 $11,414 $11,543
01/31/93 $11,539 $11,677
02/28/93 $11,995 $12,100
03/31/93 $11,837 $11,972
04/30/93 $11,972 $12,092
05/31/93 $12,009 $12,160
06/30/93 $12,198 $12,364
07/31/93 $12,186 $12,379
08/31/93 $12,437 $12,637
09/30/93 $12,582 $12,781
10/31/93 $12,579 $12,806
11/30/93 $12,428 $12,693
12/31/93 $12,735 $12,961
01/31/94 $12,874 $13,109
02/28/94 $12,508 $12,770
03/31/94 $11,905 $12,249
04/30/94 $11,949 $12,353
05/31/94 $11,993 $12,460
06/30/94 $11,856 $12,388
07/31/94 $12,041 $12,611
08/31/94 $12,085 $12,655
09/30/94 $11,914 $12,469
10/31/94 $11,611 $12,248
11/30/94 $11,290 $12,026
12/31/94 $11,606 $12,291
01/31/95 $12,011 $12,642
02/28/95 $12,414 $13,010
03/31/95 $12,546 $13,160
04/30/95 $12,525 $13,175
05/31/95 $12,918 $13,596
06/30/95 $12,683 $13,477
07/31/95 $12,723 $13,604
08/31/95 $12,885 $13,777
09/30/95 $12,974 $13,864
10/31/95 $13,227 $14,065
11/30/95 $13,505 $14,299
12/31/95 $13,696 $14,436
01/31/96 $13,749 $14,545
02/28/96 $13,556 $14,447
03/31/96 $13,336 $14,263
04/30/96 $13,298 $14,222
05/31/96 $13,323 $14,217
06/30/96 $13,457 $14,372
07/31/96 $13,556 $14,502
08/31/96 $13,489 $14,499
09/30/96 $13,713 $14,701
10/31/96 $13,828 $14,867
11/30/96 $14,066 $15,140
12/31/96 $13,999 $15,076
01/31/97 $13,957 $15,104
02/28/97 $14,082 $15,243
03/31/97 $13,886 $15,040
04/30/97 $14,044 $15,166
05/31/97 $14,245 $15,394
06/30/97 $14,368 $15,558
07/31/97 $14,760 $15,989
08/31/97 $14,609 $15,839
</TABLE>
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 98.82% of the total dividends paid by the Fund from net investment
income during the year ended August 31, 1997 is designated as an exempt-interest
dividend.
- --------------------------------------------------------------------------------
14
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Alabama Fund Arkansas Fund Georgia Fund Kentucky Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in Municipals Portfolio --
Identified cost $ 90,188,445 $ 58,224,727 $ 87,370,950 $ 113,757,776
Unrealized appreciation 6,317,355 3,343,940 6,029,293 7,978,535
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio, at value (Note 1A) $ 96,505,800 $ 61,568,667 $ 93,400,243 $ 121,736,311
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 2,312 $ 30,074 $ 21,007 $ 50,496
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 96,508,112 $ 61,598,741 $ 93,421,250 $ 121,786,807
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 181,096 $ 115,501 $ 183,426 $ 235,483
Payable for Fund shares redeemed 111,707 117,416 47,019 104,308
Payable to affiliate for Trustees' fees (Note 4) 277 277 277 554
Accrued expenses 60,592 43,061 62,760 70,189
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 353,672 $ 276,255 $ 293,482 $ 410,534
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 96,154,440 $ 61,322,486 $ 93,127,768 $ 121,376,273
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 92,805,766 $ 60,874,637 $ 94,585,552 $ 117,702,798
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified
cost) (3,044,269) (2,861,756) (7,509,448) (4,189,572)
Accumulated undistributed (distributions in excess
of) net investment income 75,588 (34,335) 22,371 (115,488)
Net unrealized appreciation of investments from
Portfolio (computed on the basis of identified
cost) 6,317,355 3,343,940 6,029,293 7,978,535
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 96,154,440 $ 61,322,486 $ 93,127,768 $ 121,376,273
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
8,858,362 5,836,257 9,182,607 11,656,202
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest
outstanding) $ 10.85 $ 10.51 $ 10.14 $ 10.41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Marathon
Marathon Marathon Marathon North Carolina
Louisiana Fund Maryland Fund Missouri Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investment in Municipals Portfolio --
Identified cost $ 30,503,225 $ 101,029,453 $ 71,861,078 $ 140,321,392
Unrealized appreciation 1,580,087 5,083,563 5,852,950 11,753,863
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio, at value (Note 1A) $ 32,083,312 $ 106,113,016 $ 77,714,028 $ 152,075,255
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 112,993 $ 32,365 $ 11,165 $ 38,042
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 32,196,305 $ 106,145,381 $ 77,725,193 $ 152,113,297
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends payable $ 65,414 $ 200,259 $ 145,445 $ 296,910
Payable for Fund shares redeemed 111,048 211,111 55,975 163,858
Payable to affiliate for Trustees' fees (Note 4) 28 554 277 554
Accrued expenses 23,904 62,811 44,369 87,854
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 200,394 $ 474,735 $ 246,066 $ 549,176
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 31,995,911 $ 105,670,646 $ 77,479,127 $ 151,564,121
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 32,507,728 $ 102,561,169 $ 73,809,171 $ 151,024,558
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified cost) (2,121,085) (2,034,144) (2,206,634) (10,917,390)
Accumulated undistributed (distributions in excess of)
net investment income 29,181 60,058 23,640 (296,910)
Net unrealized appreciation of investments from
Portfolio (computed on the basis of identified cost) 1,580,087 5,083,563 5,852,950 11,753,863
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 31,995,911 $ 105,670,646 $ 77,479,127 $ 151,564,121
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
3,104,450 9,865,274 7,038,723 14,661,996
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest outstanding) $ 10.31 $ 10.71 $ 11.01 $ 10.34
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon
Marathon South Carolina Tennessee Virginia
Oregon Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Municipals Portfolio --
Identified cost $ 106,531,639 $ 48,914,550 $ 48,531,216 $ 148,643,100
Unrealized appreciation 6,451,620 3,996,603 3,192,908 11,578,878
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio, at value (Note 1A) $ 112,983,259 $ 52,911,153 $ 51,724,124 $ 160,221,978
- -----------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 10,162 $ 2,291 $ 120,197 $ 46,780
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 112,993,421 $ 52,913,444 $ 51,844,321 $ 160,268,758
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 212,821 $ 104,478 $ 96,472 $ 308,353
Payable for Fund shares redeemed 138,134 84,513 2,175 269,963
Payable to affiliate for Trustees' fees (Note 4) 554 277 277 554
Accrued expenses 55,779 38,478 33,322 86,970
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 407,288 $ 227,746 $ 132,246 $ 665,840
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets $ 112,586,133 $ 52,685,698 $ 51,712,075 $ 159,602,918
- -----------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ 111,710,836 $ 52,901,142 $ 50,653,976 $ 156,203,572
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified cost) (5,592,413) (4,315,919) (2,100,640) (8,074,363)
Accumulated undistributed (distributions in excess of)
net investment income 16,090 103,872 (34,169) (105,169)
Net unrealized appreciation of investments from
Portfolio (computed on the basis of identified cost) 6,451,620 3,996,603 3,192,908 11,578,878
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 112,586,133 $ 52,685,698 $ 51,712,075 $ 159,602,918
- -----------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- -----------------------------------------------------------------------------------------------------------------------------------
10,717,042 5,075,916 4,889,857 15,017,485
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share (Note 6)
- -----------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest outstanding) $ 10.51 $ 10.38 $ 10.58 $ 10.63
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Alabama Fund Arkansas Fund Georgia Fund Kentucky Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 5,965,242 $ 3,974,140 $ 6,039,019 $ 7,659,563
Expenses allocated from Portfolio (486,791) (322,855) (472,987) (609,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 5,478,451 $ 3,651,285 $ 5,566,032 $ 7,050,433
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 2,606 $ 1,571 $ 2,606 $ 3,298
Distribution fees (Note 5) 939,392 628,837 939,632 1,185,735
Transfer and dividend disbursing agent fees 78,818 52,010 71,293 90,308
Printing and postage 28,659 15,844 22,672 43,042
Legal and accounting services 27,107 27,423 27,107 27,783
Custodian fee (Note 1E) 12,386 8,403 11,436 13,467
Amortization of organization expenses (Note 1D) 2,185 2,020 503 188
Registration fees 1,370 2,441 1,070 1,808
Miscellaneous 6,600 10,322 19,549 7,695
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 1,099,123 $ 748,871 $ 1,095,868 $ 1,373,324
- ------------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1E) $ 836 $ -- $ -- $ 1,004
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 836 $ -- $ -- $ 1,004
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 1,098,287 $ 748,871 $ 1,095,868 $ 1,372,320
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 4,380,164 $ 2,902,414 $ 4,470,164 $ 5,678,113
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,116,924 $ 619,176 $ 1,270,533 $ 1,699,887
Financial futures contracts (1,083,120) (810,177) (657,101) (902,291)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $ 33,804 $ (191,001) $ 613,432 $ 797,596
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 3,763,678 $ 2,359,186 $ 3,010,582 $ 4,621,569
Financial futures contracts (121,618) (53,810) (189,892) (2,790)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 3,642,060 $ 2,305,376 $ 2,820,690 $ 4,618,779
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 3,675,864 $ 2,114,375 $ 3,434,122 $ 5,416,375
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,056,028 $ 5,016,789 $ 7,904,286 $ 11,094,488
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Louisiana Maryland Missouri North Carolina
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 2,045,274 $ 6,300,254 $ 4,776,720 $ 9,823,635
Expenses allocated from Portfolio (124,122) (491,543) (364,724) (818,586)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 1,921,152 $ 5,808,711 $ 4,411,996 $ 9,005,049
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 166 $ 3,298 $ 1,783 $ 3,430
Distribution fees (Note 5) 300,417 1,005,096 741,281 1,512,939
Transfer and dividend disbursing agent fees 29,477 81,553 56,340 116,301
Legal and accounting services 20,842 24,007 24,870 24,207
Printing and postage 8,382 35,592 26,270 47,808
Custodian fee 5,168 10,450 9,462 15,902
Amortization of organization expenses (Note 1D) 1,861 644 1,851 769
Registration fees 1,280 1,620 1,632 120
Miscellaneous 4,381 9,411 11,950 14,088
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 371,974 $ 1,171,671 $ 875,439 $ 1,735,564
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,549,178 $ 4,637,040 $ 3,536,557 $ 7,269,485
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 240,828 $ 1,817,618 $ 602,016 $ 3,204,408
Financial futures contracts (224,955) (1,233,462) (546,014) (1,013,732)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments $ 15,873 $ 584,156 $ 56,002 $ 2,190,676
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 1,129,375 $ 3,802,611 $ 3,761,925 $ 3,982,066
Financial futures contracts (49,272) (80,845) (156,260) (194,523)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 1,080,103 $ 3,721,766 $ 3,605,665 $ 3,787,543
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 1,095,976 $ 4,305,922 $ 3,661,667 $ 5,978,219
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,645,154 $ 8,942,962 $ 7,198,224 $ 13,247,704
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
19
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon
Marathon South Carolina Tennessee Virginia
Oregon Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 7,263,310 $ 3,386,223 $ 3,142,643 $ 10,231,789
Expenses allocated from Portfolio (659,660) (277,599) (221,895) (837,865)
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $ 6,603,650 $ 3,108,624 $ 2,920,748 $ 9,393,924
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,302 $ 1,733 $ 1,652 $ 3,430
Distribution fees (Note 5) 1,116,204 514,481 493,030 1,587,632
Transfer and dividend disbursing agent fees 85,531 38,516 37,623 126,358
Printing and postage 39,400 12,518 18,767 55,604
Legal and accounting services 25,631 27,107 24,007 26,507
Custodian fee 12,599 7,028 6,808 12,283
Registration fees 1,460 520 1,540 720
Amortization of organization expenses (Note 1D) 391 2,807 2,253 --
Miscellaneous 11,628 11,940 4,257 11,962
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 1,296,146 $ 616,650 $ 589,937 $ 1,824,496
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 5,307,504 $ 2,491,974 $ 2,330,811 $ 7,569,428
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,316,242 $ 478,364 $ 184,300 $ 3,632,662
Financial futures contracts (1,685,016) (657,804) (326,311) (1,797,656)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $ (368,774) $ (179,440) $ (142,011) $ 1,835,006
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 3,223,725 $ 2,138,229 $ 2,434,149 $ 4,010,143
Financial futures contracts 84,552 -- (97,392) 76,712
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 3,308,277 $ 2,138,229 $ 2,336,757 $ 4,086,855
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 2,939,503 $ 1,958,789 $ 2,194,746 $ 5,921,861
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,247,007 $ 4,450,763 $ 4,525,557 $ 13,491,289
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
20
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Alabama Fund Arkansas Fund Georgia Fund Kentucky Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,380,164 $ 2,902,414 $ 4,470,164 $ 5,678,113
Net realized gain (loss) on investments 33,804 (191,001) 613,432 797,596
Net change in unrealized appreciation (depreciation)
of investments 3,642,060 2,305,376 2,820,690 4,618,779
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,056,028 $ 5,016,789 $ 7,904,286 $ 11,094,488
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (4,350,833) $ (2,902,414) $ (4,544,863) $ (5,595,715)
In excess of net investment income -- (28,093) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (4,350,833) $ (2,930,507) $ (4,544,863) $ (5,595,715)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 3,425,462 $ 1,493,276 $ 4,418,041 $ 3,898,223
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,213,584 1,356,531 1,923,747 2,905,584
Cost of shares redeemed (14,881,607) (16,481,547) (23,565,774) (22,283,363)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (9,242,561) $ (13,631,740) $ (17,223,986) $ (15,479,556)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (5,537,366) $ (11,545,458) $ (13,864,563) $ (9,980,783)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 101,691,806 $ 72,867,944 $ 106,992,331 $ 131,357,056
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 96,154,440 $ 61,322,486 $ 93,127,768 $ 121,376,273
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 75,588 $ (34,335) $ 22,371 $ (115,488)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
21
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon
Marathon Marathon Marathon North Carolina
Increase (Decrease) in Net Assets Louisiana Fund Maryland Fund Missouri Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 1,549,178 $ 4,637,040 $ 3,536,557 $ 7,269,485
Net realized gain on investments 15,873 584,156 56,002 2,190,676
Net change in unrealized appreciation (depreciation)
of investments 1,080,103 3,721,766 3,605,665 3,787,543
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,645,154 $ 8,942,962 $ 7,198,224 $ 13,247,704
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (1,549,437) $ (4,735,705) $ (3,484,823) $ (7,269,485)
In excess of net investment income -- -- -- (77,187)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (1,549,437) $ (4,735,705) $ (3,484,823) $ (7,346,672)
- -----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 2,269,242 $ 5,778,027 $ 2,001,069 $ 4,621,092
Net asset value of shares issued to shareholders in
payment of distributions declared 703,988 2,443,240 1,707,681 3,553,856
Cost of shares redeemed (5,066,555) (16,001,200) (12,328,232) (32,400,429)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (2,093,325) $ (7,779,933) $ (8,619,482) $ (24,225,481)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (997,608) $ (3,572,676) $ (4,906,081) $ (18,324,449)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 32,993,519 $ 109,243,322 $ 82,385,208 $ 169,888,570
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 31,995,911 $ 105,670,646 $ 77,479,127 $ 151,564,121
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 29,181 $ 60,058 $ 23,640 $ (296,910)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
22
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon
Marathon South Carolina Tennessee Virginia
Increase (Decrease) in Net Assets Oregon Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 5,307,504 $ 2,491,974 $ 2,330,811 $ 7,569,428
Net realized gain (loss) on investments (368,774) (179,440) (142,011) 1,835,006
Net change in unrealized appreciation
(depreciation) of investments 3,308,277 2,138,229 2,336,757 4,086,855
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,247,007 $ 4,450,763 $ 4,525,557 $ 13,491,289
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (5,255,970) $ (2,527,975) $ (2,330,811) $ (7,542,233)
In excess of net investment income -- -- (27,480) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (5,255,970) $ (2,527,975) $ (2,358,291) $ (7,542,233)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 5,350,504 $ 1,925,203 $ 2,458,541 $ 6,424,219
Net asset value of shares issued to shareholders in
payment of distributions declared 2,928,379 1,090,706 1,177,740 3,698,500
Cost of shares redeemed (27,263,830) (9,470,155) (8,624,032) (32,387,235)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $ (18,984,947) $ (6,454,246) $ (4,987,751) $ (22,264,516)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (15,993,910) $ (4,531,458) $ (2,820,485) $ (16,315,460)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 128,580,043 $ 57,217,156 $ 54,532,560 $ 175,918,378
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 112,586,133 $ 52,685,698 $ 51,712,075 $ 159,602,918
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 16,090 $ 103,872 $ (34,169) $ (105,169)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
23
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets Alabama Fund Arkansas Fund Georgia Fund Kentucky Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 4,765,991 $ 3,384,458 $ 5,270,914 $ 6,161,006
Net realized gain (loss) on investments 1,384,151 286,714 759,762 (1,157,193)
Net change in unrealized appreciation
(depreciation) of investments (998,165) (461,293) (243,119) 1,295,426
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,151,977 $ 3,209,879 $ 5,787,557 $ 6,299,239
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (4,874,378) $ (3,545,480) $ (5,318,073) $ (6,161,006)
In excess of net investment income -- (6,242) -- (154,635)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (4,874,378) $ (3,551,722) $ (5,318,073) $ (6,315,641)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 4,160,973 $ 2,851,899 $ 3,711,347 $ 5,687,743
Net asset value of shares issued to shareholders
in payment of distributions declared 2,550,774 1,648,737 2,421,301 3,359,495
Cost of shares redeemed (13,939,744) (12,113,699) (19,752,574) (20,779,572)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (7,227,997) $ (7,613,063) $ (13,619,926) $ (11,732,334)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,950,398) $ (7,954,906) $ (13,150,442) $ (11,748,736)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 108,642,204 $ 80,822,850 $ 120,142,773 $ 143,105,792
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 101,691,806 $ 72,867,944 $ 106,992,331 $ 131,357,056
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 46,257 $ (6,242) $ 97,070 $ (197,886)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
24
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Louisiana Maryland Missouri North Carolina
Increase (Decrease) in Net Assets Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 1,587,671 $ 5,061,585 $ 3,911,414 $ 8,179,093
Net realized gain (loss) on investments (338,256) 1,530,636 1,112,409 (47,113)
Net change in unrealized appreciation (depreciation)
of investments 266,047 (575,339) (1,048,081) 744,828
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 1,515,462 $ 6,016,882 $ 3,975,742 $ 8,876,808
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (1,600,291) $ (5,239,668) $ (3,911,414) $ (8,215,663)
In excess of net investment income -- -- (27,998) (233,107)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (1,600,291) $ (5,239,668) $ (3,939,412) $ (8,448,770)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 3,990,498 $ 8,472,887 $ 3,803,859 $ 7,140,035
Net asset value of shares issued to shareholders
in payment of distributions declared 778,827 2,826,305 1,976,726 4,174,817
Cost of shares redeemed (3,526,815) (16,659,034) (13,242,423) (30,304,252)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund
share transactions $ 1,242,510 $ (5,359,842) $ (7,461,838) $ (18,989,400)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 1,157,681 $ (4,582,628) $ (7,425,508) $ (18,561,362)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 31,835,838 $ 113,825,950 $ 89,810,716 $ 188,449,932
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 32,993,519 $ 109,243,322 $ 82,385,208 $ 169,888,570
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 29,440 $ 158,723 $ (28,094) $ (235,934)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
25
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Marathon Marathon
Marathon South Carolina Tennessee Marathon
Increase (Decrease) in Net Assets Oregon Fund Fund Fund Virginia Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,037,800 $ 2,767,504 $ 2,524,350 $ 8,440,230
Net realized gain (loss) on investments (926,072) 657,297 53,224 182,208
Net change in unrealized appreciation (depreciation)
of investments 449,198 (482,418) 342,049 134,532
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,560,926 $ 2,942,383 $ 2,919,623 $ 8,756,970
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (6,124,280) $ (2,772,456) $ (2,618,373) $ (8,440,230)
In excess of net investment income (35,444) -- (6,689) (112,564)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (6,159,724) $ (2,772,456) $ (2,625,062) $ (8,552,794)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 5,131,313 $ 4,707,873 $ 3,438,193 $ 8,059,179
Net asset value of shares issued to shareholders
in payment of distributions declared 3,457,570 1,214,658 1,338,936 4,376,528
Cost of shares redeemed (24,465,802) (8,830,561) (8,022,902) (26,256,727)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (15,876,919) $ (2,908,030) $ (3,245,773) $ (13,821,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (16,475,717) $ (2,738,103) $ (2,951,212) $ (13,616,844)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 145,055,760 $ 59,955,259 $ 57,483,772 $ 189,535,222
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 128,580,043 $ 57,217,156 $ 54,532,560 $ 175,918,378
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (35,444) $ 139,873 $ (6,689) $ (132,364)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
26
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Alabama Fund
-----------------------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------------------
August 31, September 30,
------------------------------------------------------- -----------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.460 $ 10.440 $ 10.210 $ 11.060 $ 10.340 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.469 $ 0.470 $ 0.479 $ 0.425 $ 0.475 $ 0.208
Net realized and unrealized gain (loss)
on investments 0.386 0.030 0.244 (0.769) 0.837 0.385++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.855 $ 0.500 $ 0.723 $ (0.344) $ 1.312 $ 0.593
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.465) $ (0.480) $ (0.479) $ (0.425) $ (0.475) $ (0.208)
In excess of net investment income -- -- (0.014) (0.081) (0.117) (0.045)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.465) $ (0.480) $ (0.493) $ (0.506) $ (0.592) $ (0.253)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.850 $ 10.460 $ 10.440 $ 10.210 $ 11.060 $ 10.340
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 8.33% 4.85% 7.38% (3.18)% 13.09% 5.71%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 96,154 $ 101,692 $108,642 $105,553 $ 84,621 $ 21,105
Ratio of net expenses to average daily
net assets /(2)//(3)/ 1.60% 1.57% 1.51% 1.43%+ 1.37% 1.01%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction /(2)/ 1.59% 1.52% -- -- -- --
Ratio of net investment income to average
daily net assets 4.39% 4.44% 4.74% 4.35%+ 4.30% 4.49%+
Portfolio Turnover /(4)/ -- -- -- -- 15% 13%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the Investment Adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses /(2)/ 1.49% 1.50%+
Net investment income 4.18% 4.00%+
Net investment income per share $ 0.462 $ 0.185
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accordance with the net realized and
unrealized gain for the period because of timing of sales of Fund shares
and the amount of per share realized and unrealized gains and losses at
such time.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, May 1, 1992, to September 30,
1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the 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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
27
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Arkansas Fund
--------------------------------------------------------------
Year Ended
--------------------------------------------------------------
August 31, Sept. 30,
- --------------------------------------------------------------------------------------------------------------- ------------
1997 1996 1995 1994** 1993*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.190 $ 10.250 $10.140 $ 10.910 $ 10.000
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.445 $ 0.450 $ 0.460 $ 0.431 $ 0.471
Net realized and unrealized gain (loss) on investments 0.324 (0.038) 0.132 (0.703) 1.025
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.769 $ 0.412 $ 0.592 $ (0.272) $ 1.496
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.445) $ (0.471) $(0.460) $ (0.431) $ (0.471)
In excess of net investment income (0.004) (0.001) (0.022) (0.067) (0.115)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.449) $ (0.472) $(0.482) $ (0.498) $ (0.586)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.510 $ 10.190 $10.250 $ 10.140 $ 10.910
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 7.70% 4.05% 6.15% (2.53)% 15.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data ++
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 61,322 $ 72,868 $80,823 $ 82,436 $ 59,205
Ratio of net expenses to average daily net assets/(2)(3)/ 1.60% 1.56% 1.50% 1.17%+ 0.88%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.59% 1.54% -- -- --
Ratio of net investment income to average daily net assets 4.31% 4.34% 4.67% 4.47%+ 4.27%+
Portfolio Turnover/(4)/ -- -- -- 5% 13%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses/(2)/ 1.40%+ 1.42%+
Net investment income 4.24%+ 3.73%+
Net investment income per share $ 0.409 $ 0.411
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, October 2, 1992, to September
30, 1993.
** For the eleven months ended August 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
28
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Georgia Fund
---------------------------------------------------------------------------
Year Ended
---------------------------------------------------------------------------
August 31, Sept. 30,
- ---------------------------------------------------------------------------------------------------------- ------------------------
1997 1996 1995 1994** 1993 1992*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.810 $ 9.790 $ 9.800 $ 10.750 $ 10.120 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
Net investment income $ 0.449 $ 0.451 $ 0.450 $ 0.413 $ 0.459 $ 0.380
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.336 0.024 0.007++ (0.841) 0.776 0.215
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.785 $ 0.475 $ 0.457 $ (0.428) $ 1.235 $ 0.595
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.455) $ (0.455) $ (0.450) $ (0.413) $ (0.459) $ (0.380)
In excess of net investment income -- -- (0.017) (0.065) (0.129) (0.095)
From net realized gain on investments -- -- -- -- (0.017) --
In excess of net realized gain on investments -- -- -- (0.044) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.455) $ (0.455) $ (0.467) $ (0.522) $ (0.605) $ (0.475)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.140 $ 9.810 $ 9.790 $ 9.800 $ 10.750 $ 10.120
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(1) 8.16% 4.91% 4.90% (4.08)% 12.60% 5.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 93,128 $106,992 $ 120,143 $134,481 $ 120,043 $ 42,156
Ratio of net expenses to average daily net assets(2)(3) 1.59% 1.58% 1.49% 1.41%+ 1.52% 1.13%+
Ratio of net expenses to average daily net assets,
after custodian fee reduction(2) 1.57% 1.52% -- -- -- --
Ratio of net investment income to average daily net
assets 4.48% 4.55% 4.72% 4.39%+ 4.27% 4.72%+
Portfolio Turnover(4) -- -- -- -- 20% 33%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the Investment Adviser fee, an allocation of expenses to
the Investment Adviser or Administrator, or both. Had such actions not
been taken, the ratios and net investment income per share would have
been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C>
Expenses (2) 1.61%+
Net investment income 4.24%+
Net investment income per share $ 0.341
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the period from the start of business, December 23, 1991, to September
30, 1992.
** For the eleven months ended August 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
29
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Kentucky Fund
-----------------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------------
August 31, Sept. 30,
------------------------------------------------ -----------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.970 $ 9.990 $ 9.850 $ 10.780 $ 10.090 $10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.456 $ 0.450 $ 0.458 $ 0.415 $ 0.462 $ 0.363
Net realized and unrealized gain (loss) on
investments 0.435 (0.009)++ 0.163 (0.811) 0.820 0.192
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.891 $ 0.441 $ 0.621 $ (0.396) $ 1.282 $ 0.555
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.451) $(0.450) $ (0.458) $(0.415) $ (0.462) $(0.363)
In excess of net investment income -- (0.011) (0.023) (0.075) (0.125) (0.102)
From net realized gain on investments -- -- -- -- (0.005) --
In excess of net realized gain on investments -- -- -- (0.044) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.451) $(0.461) $ (0.481) $(0.534) $ (0.592) $(0.465)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.410 $ 9.970 $ 9.990 $ 9.850 $ 10.780 $10.090
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.12% 4.45% 6.61% (3.78)% 13.05% 5.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $121,376 $131,357 $143,106 $141,994 $120,093 $46,835
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average daily net assets
/(2)(3)/ 1.60% 1.57% 1.52% 1.44%+ 1.50% 1.44%+
Ratio of net expenses to average daily net assets,
after custodian fee reduction/(2)/ 1.57% 1.54% -- -- -- --
Ratio of net investment income to average daily net
assets 4.50% 4.45% 4.74% 4.39%+ 4.29% 4.56%+
Portfolio Turnover/(4)/ -- -- -- -- 21% 64%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C>
1.52%+
Expenses/(2)/
Net investment income 4.48%+
Net investment income per share $0.357
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
loss for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, December 23, 1991, to September
30, 1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
30
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Louisiana Fund
----------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------
August 31, Sept. 30,
---------------------------------------------------- ------------
1997 1996 1995 1994** 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.960 $ 9.980 $ 10.010 $ 11.130 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.482 $ 0.486 $ 0.487 $ 0.447 $ 0.478
Net realized and unrealized gain (loss) on investments 0.350 (0.016) (0.006)++ (0.937) 1.234
Total income (loss) from operations $ 0.832 $ 0.470 $ 0.481 $ (0.490) $ 1.712
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.482) $ (0.490) $ (0.487) $ (0.447) $ (0.478)
In excess of net investment income -- -- (0.024) (0.074) (0.104)
In excess of net realized gain on investments -- -- -- (0.109) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.482) $ (0.490) $ (0.511) $ (0.630) $ (0.582)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.310 $ 9.960 $ 9.980 $ 10.010 $ 11.130
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.52% 4.77% 5.08% (4.56)% 17.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 31,996 $ 32,994 $ 31,836 $ 29,020 $ 17,935
Ratio of net expenses to average daily net assets/(2)(3)/ 1.54% 1.41% 1.31% 1.08%+ 1.07%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.52% 1.34% -- -- --
Ratio of net investment income to average daily net assets 4.74% 4.82% 4.97% 4.62%+ 4.27%+
Portfolio Turnover/(4)/ -- -- -- 14% 86%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C>
Expenses/(2)(3)/ 1.53% 1.42% 1.44%+ 1.76%+
Expenses after custodian fee reduction/(2)/ 1.45% -- -- --
Net investment income 4.70% 4.86% 4.26%+ 3.58%+
Net investment income per share $ 0.474 $ 0.470 $ 0.412 $ 0.401
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
loss for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the period from the start of business, October 2, 1992, to September
30, 1993.
** For the eleven months ended August 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
31
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Maryland Fund
-----------------------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------------------
August 31, Sept. 30,
- ------------------------------------------------------------------------------------------------------ --------------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.300 $ 10.230 $ 10.070 $ 11.070 $ 10.290 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.453 $ 0.464 $ 0.476 $ 0.428 $ 0.466 $ 0.303
Net realized and unrealized gain (loss) on
investments 0.419 0.086 0.169 (0.922) 0.890 0.375++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.872 $ 0.550 $ 0.645 $ (0.494) $ 1.356 $ 0.678
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.462) $ (0.480) $ (0.476) $ (0.428) $ (0.466) $ (0.303)
In excess of net investment income -- -- (0.009) (0.070) (0.110) (0.085)
In excess of net realized gain on investments -- -- -- (0.008) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.462) $ (0.480) $ (0.485) $ (0.506) $ (0.576) $ (0.388)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.710 $ 10.300 $ 10.230 $ 10.070 $ 11.070 $ 10.290
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.64% 5.44% 6.71% (4.56)% 13.61% 6.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $105,671 $109,243 $113,826 $116,721 $ 95,226 $ 29,180
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.57% 1.57% 1.50% 1.43%+ 1.43% 1.30%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction/(2)/ 1.54% 1.55% -- -- -- --
Ratio of net investment income to average daily
net assets 4.30% 4.46% 4.82% 4.44%+ 4.28% 4.25%+
Portfolio Turnover/(4)/ -- -- -- -- 12% 3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses/(2)/ 1.48% 1.62%+
Net investment income 4.23% 3.93%+
Net investment income per share $ 0.461 $ 0.280
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 3, 1992 to September
30, 1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
32
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Missouri Fund
----------------------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------------------
August 31, Sept. 30,
--------------------------------------------------- ------------------------
1997 1996 1995 1994** 1993 1992*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.510 $ 10.510 $ 10.240 $ 11.250 $ 10.400 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.478 $ 0.476 $ 0.477 $ 0.423 $ 0.470 $ 0.200
Net realized and unrealized gain (loss) on
investments 0.493 0.003 0.289 (0.904) 1.005 0.455
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.971 $ 0.479 $ 0.766 $ (0.481) $ 1.475 $ 0.655
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.471) $ (0.476) $ (0.477) $ (0.423) $ (0.470) $ (0.200)
In excess of net investment income -- (0.003) (0.019) (0.084) (0.128) (0.055)
In excess of net realized gain on investments -- -- -- (0.022) (0.027) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.471) $ (0.479) $ (0.496) $ (0.529) $ (0.625) $ (0.255)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 11.010 $ 10.510 $ 10.510 $ 10.240 $ 11.250 $ 10.400
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.42% 4.60% 7.82% (4.33)% 14.66% 6.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 77,479 $ 82,385 $ 89,811 $ 91,227 $ 76,653 $ 25,225
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.57% 1.56% 1.53% 1.49%+ 1.52% 1.32%+
Ratio of net expenses to average daily net
assets, after custodian
fee reduction/(2)/ 1.56% 1.54% -- -- -- --
Ratio of net investment income to average daily
net assets 4.44% 4.47% 4.72% 4.30%+ 4.23% 4.31%+
Portfolio Turnover/(4)/ -- -- -- -- 14% 21%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses/(2)/ 1.55% 1.49%+
Net investment income 4.20% 4.14%+
Net investment income per share $ 0.467 $ 0.192
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, May 1, 1992, to September 30,
1992.
** For the eleven months ended August 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
33
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon North Carolina Fund
-----------------------------------------------------------------------------------
Year Ended
-----------------------------------------------------------------------------------
August 31, Sept. 30,
- ---------------------------------------------------------------------------------------------------- -------------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.970 $ 9.960 $ 9.970 $ 10.940 $ 10.300 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.452 $ 0.452 $ 0.466 $ 0.423 $ 0.468 $ 0.456
Net realized and unrealized gain (loss) on
investments 0.378 0.026 0.011++ (0.895) 0.794 0.423++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.830 $ 0.478 $ 0.477 $ (0.472) $ 1.262 $ 0.879
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.455) $ (0.455) $ (0.466) $ (0.423) $ (0.468) $ (0.456)
In excess of net investment income (0.005) (0.013) (0.021) (0.075) (0.120) (0.123)
In excess of net realized gain on investments -- -- -- -- (0.034) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.460) $ (0.468) $ (0.487) $ (0.498) $ (0.622) $ (0.579)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.340 $ 9.970 $ 9.960 $ 9.970 $ 10.940 $ 10.300
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.50% 4.83% 5.03% (4.40)% 12.69% 8.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $151,564 $169,889 $188,450 $192,667 $173,828 $ 71,733
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.60% 1.59% 1.51% 1.42%+ 1.52% 1.35%+
Ratio of net expenses to average daily net
assets, after custodian
fee reduction/(2)/ 1.58% 1.54% -- -- -- --
Ratio of net investment income to average daily
net assets 4.48% 4.47% 4.78% 4.43%+ 4.34% 4.54%+
Portfolio Turnover/(4)/ -- -- -- -- 16% 52%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C>
Expenses/(2)/ 1.57%+
Net investment income 4.32%+
Net investment income per share $ 0.434
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, October 23, 1991, to September
30, 1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
34
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Oregon Fund
-----------------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------------------
August 31, Sept. 30,
---------------------------------------------------- -------------------------
1997 1996 1995 1994* 1993 1992**
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year $ 10.240 $ 10.310 $ 10.090 $ 11.130 $ 10.270 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.456 $ 0.450 $ 0.455 $ 0.415 $ 0.459 $ 0.351
Net realized and unrealized gain (loss) on
investments 0.266 (0.061) 0.241 (0.869) 0.983 0.368
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.722 $ 0.389 $ 0.696 $ (0.454) $ 1.442 $ 0.719
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.452) $ (0.457) $ (0.455) $ (0.415) $ (0.459) $ (0.351)
In excess of net investment income -- (0.002) (0.021) (0.078) (0.117) (0.098)
From net realized gain on investments -- -- -- (0.093) (0.006) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.452) $ (0.459) $ (0.476) $ (0.586) $ (0.582) $ (0.449)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.510 $ 10.240 $ 10.310 $ 10.090 $ 11.130 $ 10.270
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 7.20% 3.80% 7.22% (4.21)% 14.47% 7.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $112,586 $128,580 $145,056 $151,127 $128,229 $ 41,703
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.63% 1.56% 1.53% 1.43%+ 1.55% 1.47%+
Ratio of net expenses to average daily net
assets, after custodian
fee reduction/(2)/ 1.63% 1.53% -- -- -- --
Ratio of net investment income to average daily
net assets 4.41% 4.33% 4.59% 4.28%+ 4.22% 4.27%+
Portfolio Turnover/(4)/ -- -- -- -- 23% 44%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C>
Expenses/(2)/ 1.63%+
Net investment income 4.11%+
Net investment income per share $ 0.338
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, December 24, 1991, to September
30, 1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
35
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon South Carolina Fund
-------------------------------------------------------------
Year Ended
-------------------------------------------------------------
August 31, Sept. 30,
------------------------------------------------ ---------
1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.020 $ 10.000 $ 9.940 $ 10.890 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.463 $ 0.467 $ 0.460 $ 0.408 $ 0.461
Net realized and unrealized gain (loss) on investments 0.364 0.021 0.071 (0.870) 0.986
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.827 $ 0.488 $ 0.531 $ (0.462) $ 1.447
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.467) $ (0.468) $ (0.460) $ (0.408) $ (0.461)
In excess of net investment income -- -- (0.011) (0.080) (0.096)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.467) $ (0.468) $ (0.471) $ (0.488) $ (0.557)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.380 $ 10.020 $ 10.000 $ 9.940 $ 10.890
- ------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.41% 4.92% 5.64% (4.33)% 14.50%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 52,686 $ 57,217 $ 59,955 $ 59,878 $ 43,169
Ratio of net expenses to average daily net assets/(2)(3)/ 1.63% 1.60% 1.49% 1.36%+ 1.07%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.62% 1.58% -- -- --
Ratio of net investment income to average daily net assets 4.50% 4.60% 4.77% 4.27%+ 4.22%+
Portfolio Turnover/(4)/ -- -- -- 3% 13%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratio (As a percentage of average daily net assets):
<S> <C>
Expenses/(2)/ 1.44%+
Net investment income 3.85%+
Net investment income per share $ 0.421
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, October 2, 1992, to September
30, 1993.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as its
corresponding Portfolio, to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios
for each of the prior periods have not been adjusted to reflect this
change.
/(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 its respective Portfolio is shown in the
Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
36
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Tennessee Fund
--------------------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------------------------------
August 31, Sept. 30,
------------------------------------------------------ -------------------------
1997 1996 1995 1994* 1993 1992**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.150 $ 10.110 $ 10.020 $ 11.070 $ 10.010 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.453 $ 0.457 $ 0.468 $ 0.426 $ 0.466 $ 0.040
Net realized and unrealized gain (loss) on
investments 0.436 0.059 0.115 (0.848) 1.158 0.027++
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.889 $ 0.516 $ 0.583 $ (0.422) $ 1.624 $ 0.067
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.453) $ (0.475) $ (0.468) $ (0.426) $ (0.466) $ (0.040)
In excess of net investment income (0.006) (0.001) (0.025) (0.071) (0.098) (0.017)
From net realized gain on investments -- -- -- (0.094) -- --
In excess of net realized gain on investments -- -- -- (0.037) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.459) $ (0.476) $ (0.493) $ (0.628) $ (0.564) $ (0.057)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.580 $ 10.150 $ 10.110 $ 10.020 $ 11.070 $ 10.010
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.95% 5.16% 6.12% (3.93)% 16.97% 0.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 51,712 $ 54,533 $ 57,484 $ 55,379 $ 39,648 $ 3,475
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.54% 1.53% 1.47% 1.37%+ 1.30% 1.00%+
Ratio of net expenses to average daily net
assets, after custodian fee reduction/(2)/ 1.53% 1.51% -- -- -- --
Ratio of net investment income to average daily
net assets 4.39% 4.45% 4.77% 4.44%+ 4.24% 2.91%+
Portfolio Turnover/(4)/ -- -- -- -- 28% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the Investment
Adviser or Administrator, or both. Had such actions not been taken, the
ratios and net investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C>
Expenses/(2)/ 1.61% 2.10%+
Net investment income 3.93% 1.81%+
Net investment income per share $ 0.432 $ 0.025
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Fund shares and the
amount of the per share realized and unrealized gains and losses at such
time.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, August 25, 1992, to September
30, 1992.
/(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 reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the prior periods have not been adjusted to reflect
this change.
/(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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
37
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Marathon Virginia Fund
-------------------------------------------------------------------------------
Year Ended
-------------------------------------------------------------------------------
August 31, Sept. 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994* 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.260 $ 10.260 $ 10.120 $ 11.060 $ 10.460 $ 10.200
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.467 $ 0.471 $ 0.479 $ 0.438 $ 0.483 $ 0.526
Net realized and unrealized gain (loss)
on investments 0.369 0.006 0.161 (0.864) 0.762 0.385
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.836 $ 0.477 $ 0.640 $ (0.426) $ 1.245 $ 0.911
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.466) $ (0.471) $ (0.479) $ (0.438) $ (0.483) $ (0.526)
In excess of net investment income -- (0.006) (0.021) (0.076) (0.130) (0.120)
From net realized gain on investments -- -- -- -- (0.022) (0.005)
In excess of net realized gain on investments -- -- -- -- (0.010) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.466) $ (0.477) $ (0.500) $ (0.514) $ (0.645) $ (0.651)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.630 $ 10.260 $ 10.260 $ 10.120 $ 11.060 $ 10.460
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.31% 4.67% 6.62% (3.95)% 12.33% 9.16%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+++
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 159,603 $ 175,918 $ 189,535 $ 193,420 $ 175,426 $ 72,629
Ratio of net expenses to average daily net
assets/(2)(3)/ 1.60% 1.56% 1.50% 1.44%++ 1.52% 1.36%
Ratio of net expenses to average daily net
assets, after custodian fee reduction/(2)/ 1.57% 1.53% -- -- -- --
Ratio of net investment income to average
daily net assets 4.47% 4.52% 4.81% 4.51%++ 4.42% 4.86%
Portfolio Turnover/(4)/ -- -- -- -- 27% 85%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the Investment Adviser fee, an allocation of expenses to the
Investment Adviser or Administrator, or both. Had such actions not been
taken, the ratios and net investment income per share would have been as
follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C>
Expenses/(2)/ 1.59%
Net investment income 4.63%
Net investment income per share $ 0.501
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund, as well as
its corresponding Portfolio, to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the 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 its respective Portfolio is
shown in the Portfolio's financial statements which are included elsewhere
in this report.
See notes to financial statements
38
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
----------------------------------------------------------------------------
Eaton Vance Municipals Trust (the Trust) is an entity of the type commonly
known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust presently consists of sixty Funds, twelve of
the non-diversified funds are included in these financial statements. They
include EV Marathon Alabama Municipals Fund ("Marathon Alabama Fund"), EV
Marathon Arkansas Municipals Fund ("Marathon Arkansas Fund"), EV Marathon
Georgia Municipals Fund ("Marathon Georgia Fund"), EV Marathon Kentucky
Municipals Fund ("Marathon Kentucky Fund"), EV Marathon Louisiana Municipals
Fund ("Marathon Louisiana Fund"), EV Marathon Maryland Municipals Fund
("Marathon Maryland Fund"), EV Marathon Missouri Municipals Fund ("Marathon
Missouri Fund"), EV Marathon North Carolina Municipals Fund ("Marathon North
Carolina Fund"), EV Marathon Oregon Municipals Fund ("Marathon Oregon
Fund"), EV Marathon South Carolina Municipals Fund ("Marathon South Carolina
Fund"), EV Marathon Tennessee Municipals Fund ("Marathon Tennessee Fund")
and EV Marathon Virginia Municipals Fund ("Marathon Virginia Fund"). Each
Fund invests all of its investable assets in interests in a separate
corresponding open-end management investment company (a "Portfolio"), a New
York Trust, having the same investment objective as its corresponding Fund.
The Marathon Alabama Fund invests its assets in the Alabama Municipals
Portfolio, the Marathon Arkansas Fund invests its assets in the Arkansas
Municipals Portfolio, the Marathon Georgia Fund invests its assets in the
Georgia Municipals Portfolio, the Marathon Kentucky Fund invests its assets
in the Kentucky Municipals Portfolio, the Marathon Louisiana Fund invests
its assets in the Louisiana Municipals Portfolio, the Marathon Maryland Fund
invests its assets in the Maryland Municipals Portfolio, the Marathon
Missouri Fund invests its assets in the Missouri Municipals Portfolio, the
Marathon North Carolina Fund invests its assets in the North Carolina
Municipals Portfolio, the Marathon Oregon Fund invests its assets in the
Oregon Municipals Portfolio, the Marathon South Carolina Fund invests its
assets in the South Carolina Municipals Portfolio, the Marathon Tennessee
Fund invests its assets in the Tennessee Municipals Portfolio and the
Marathon Virginia Fund invests its assets in the Virginia Municipals
Portfolio. The value of each Fund's investment in its corresponding
Portfolio reflects the Fund's proportionate interest in the net assets of
that Portfolio (94.3%, 98.2%, 98.1%, 98.9%, 93.2%, 98.8%, 97.3%, 90.8%,
99.4%, 98.0%, 95.5% and 99.1% at August 31, 1997 for the Marathon Alabama
Fund, Marathon Arkansas Fund, Marathon Georgia Fund, Marathon Kentucky Fund,
Marathon Louisiana Fund, Marathon Maryland Fund, Marathon Missouri Fund,
Marathon North Carolina Fund, Marathon Oregon Fund, Marathon South Carolina
Fund, Marathon Tennessee Fund and Marathon Virginia Fund, respectively). The
performance of each Fund is directly affected by the performance of its
corresponding Portfolio. The financial statements of each Portfolio,
including the portfolio of investments, are included elsewhere in this
report and should be read in conjunction with each Fund's financial
statements.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple
class plan for the Funds which permit the Funds to issue more than one class
of shares. Initially, the Funds will offer two classes of shares and,
effective September 1, 1997, the existing shares of the Fund will be
designated as Class B Shares.
On June 23, 1997, the Board of Trustees also approved a Plan of
Reorganization (the "Plan") for the Trust. Under the terms of the Plan, the
Marathon Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund,
Marathon Kentucky Fund, Marathon Louisiana Fund, Marathon Maryland Fund,
Marathon Missouri Fund, Marathon North Carolina Fund, Marathon Oregon Fund,
Marathon South Carolina Fund, Marathon Tennessee Fund, and Marathon Virginia
Fund (the Marathon Funds), separate series of the Trust, will acquire
substantially all of the assets and liabilities of the EV Traditional
Alabama Municipals Fund, EV Traditional Arkansas Municipals Fund, EV
Traditional Georgia Municipals Fund, EV Traditional Kentucky Municipals
Fund, EV Traditional Louisiana Municipals Fund, EV Traditional Maryland
Municipals Fund, EV Traditional Missouri Municipals Fund and EV Traditional
North Carolina Municipals Fund, EV Traditional Oregon Municipals Fund, EV
Traditional South Carolina Municipals Fund, EV Traditional Tennessee
Municipals Fund, and EV Traditional Virginia Municipals Fund, respectively
(the Traditional Funds). The transactions will be structured for tax
purposes to qualify as a tax-free reorganization under the Internal Revenue
Code. As a result of the reorganization, shareholders of the Traditional
Funds will receive Class A Shares of the Marathon Funds. The reorganization
will occur after the close of business, August 31, 1997.
39
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of securities by the Portfolios is
discussed in Note 1A of the Portfolios' Notes to Financial Statements which
are included elsewhere in this report.
B Income -- Each Fund's net investment income consists of the Fund's pro
rata share of the net investment income of its corresponding Portfolio, less
all actual and accrued expenses of each Fund determined in accordance with
generally accepted accounting principles.
C Federal Taxes -- Each Fund's policy is to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders each year all of its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. At August 31, 1997,
the Funds, for federal income tax purposes, had capital loss carryovers
which will reduce taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Funds of any liability for
federal income or excise tax. The amounts and expiration dates of the
capital loss carryovers are as follows:
<TABLE>
<CAPTION>
Fund Amount Expires
----------------------------------------------------------------------------
<S> <C> <C>
Marathon Alabama Fund $ 94,556 August, 31, 2005
826,540 August, 31, 2004
1,877,237 August, 31, 2003
362,951 August, 31, 2002
1,050 August, 31, 2000
Marathon Arkansas Fund 244,989 August, 31, 2005
1,802,164 August, 31, 2004
561,676 August, 31, 2003
241,061 August, 31, 2002
Marathon Georgia Fund 6,622,861 August, 31, 2004
926,209 August, 31, 2003
Marathon Kentucky Fund 191,867 August, 31, 2005
2,909,053 August, 31, 2004
1,058,248 August, 31, 2003
Marathon Louisiana Fund 240,786 August, 31, 2005
1,622,700 August, 31, 2004
278,670 August, 31, 2003
Marathon Maryland Fund 1,308,929 August, 31, 2004
703,933 August, 31, 2003
Marathon Missouri Fund 103,651 August, 31, 2005
1,702,533 August, 31, 2004
435,519 August, 31, 2003
Marathon North Carolina Fund 8,163,670 August, 31, 2004
2,761,547 August, 31, 2003
Marathon Oregon Fund 897,795 August, 31, 2005
4,197,676 August, 31, 2004
468,881 August, 31, 2003
Marathon South Carolina Fund 180,155 August, 31, 2005
2,757,057 August, 31, 2004
1,317,687 August, 31, 2003
74,010 August, 31, 2002
Marathon Tennessee Fund 238,795 August, 31, 2005
1,694,580 August, 31, 2004
195,240 August, 31, 2003
Marathon Virginia Fund 7,497,842 August, 31, 2004
508,389 August, 31, 2003
</TABLE>
Dividends paid by each Fund from net interest on tax-exempt municipal bonds
allocated from its corresponding Portfolio are not includable by
shareholders as gross income for federal income tax purposes because each
Fund and Portfolio intend to meet certain requirements of the Internal
Revenue Code applicable to regulated investment companies which will enable
the Funds to pay tax-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.
40
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
D Deferred Organization Expenses -- Costs incurred by each Fund in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Funds and the Portfolios. Pursuant to the respective
custodian agreements, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Funds or the
Portfolios maintain with IBT. All significant credit balances used to reduce
each Fund's custodian fees are reported as a reduction of expenses in the
Statements of Operations.
F Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
G Other -- Investment transactions are accounted for on a trade date basis.
2 Distributions to Shareholders
----------------------------------------------------------------------------
The net income of each Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest income and capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares or, at the
election of the shareholder, in cash.
The Funds distinguish between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition
or classification of income between the financial statements and tax
earnings and profits which result in temporary over distributions for
financial statement purposes are classified as distributions in excess of
net investment income or accumulated net realized gains.
Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
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.
During the year ended August 31, 1997 for the Marathon North Carolina Fund,
$16,211 was reclassified from Paid-in Capital to Accumulated Distributions
in Excess of Net Investment Income due to permanent differences between book
and tax accounting for certain distributions related to capital gains. Net
investment income, net realized gains and net assets were not affected by
this reclassification.
3 Shares of Beneficial Interest
----------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Marathon Alabama Fund
-----------------------------------
Year Ended August 31,
-----------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 320,982 391,938
Issued to shareholders electing to receive
payments of distributions in Fund
shares 207,245 241,707
Redemptions (1,391,666) (1,321,649)
- --------------------------------------------------------------------------------
Net decrease (863,439) (688,004)
- --------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Marathon Arkansas Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 143,949 274,418
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 130,882 159,265
Redemptions (1,589,210) (1,168,773)
- --------------------------------------------------------------------------------
Net decrease (1,314,379) (735,090)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Georgia Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 441,579 373,857
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 192,185 244,086
Redemptions (2,356,341) (1,990,386)
- --------------------------------------------------------------------------------
Net decrease (1,722,577) (1,372,443)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Kentucky Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 382,603 561,028
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 284,793 332,092
Redemptions (2,186,957) (2,048,388)
- --------------------------------------------------------------------------------
Net decrease (1,519,561) (1,155,268)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Louisiana Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 222,047 395,341
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 69,196 77,363
Redemptions (497,956) (350,233)
- --------------------------------------------------------------------------------
Net increase (decrease) (206,713) 122,471
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Maryland Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 549,185 812,572
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 232,372 271,666
Redemptions (1,524,095) (1,603,403)
- --------------------------------------------------------------------------------
Net decrease (742,538) (519,165)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Missouri Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 186,027 356,070
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 158,432 185,830
Redemptions (1,144,910) (1,244,942)
- --------------------------------------------------------------------------------
Net decrease (800,451) (703,042)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon North Carolina Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 454,728 703,283
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 349,575 412,501
Redemptions (3,186,918) (2,988,053)
- --------------------------------------------------------------------------------
Net decrease (2,382,615) (1,872,269)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Oregon Fund
----------------------------------------
Year Ended August 31,
----------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 517,033 490,291
Issued to shareholders
electing to receive
payments of distributions
in Fund shares 282,470 332,112
Redemptions (2,633,847) (2,346,208)
- --------------------------------------------------------------------------------
Net decrease (1,834,344) (1,523,805)
- --------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Marathon South Carolina Fund
------------------------------
Year Ended August 31,
------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 188,272 462,452
Issued to shareholders electing to
receive payments of
distributions in Fund shares 106,519 119,696
Redemptions (927,151) (870,124)
- --------------------------------------------------------------------------------
Net decrease (632,360) (287,976)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Tennessee Fund
------------------------------
Year Ended August 31,
------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 237,074 334,666
Issued to shareholders electing to
receive payments of
distributions in Fund shares 113,438 130,351
Redemptions (831,841) (779,131)
- --------------------------------------------------------------------------------
Net decrease (481,329) (314,114)
- --------------------------------------------------------------------------------
<CAPTION>
Marathon Virginia Fund
------------------------------
Year Ended August 31,
------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales 613,925 770,506
Issued to shareholders electing to
receive payments of
distributions in Fund shares 353,174 419,968
Redemptions (3,092,672) (2,518,984)
- --------------------------------------------------------------------------------
Net decrease (2,125,573) (1,328,510)
- --------------------------------------------------------------------------------
</TABLE>
4 Transactions with Affiliates
------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. Each of the Portfolios have engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render investment
advisory services. See Note 2 of the Portfolios' Notes to Financial Statements
which are included elsewhere in this report. Certain of the officers and
Trustees of the Funds and Portfolios are officers and directors/trustees of
the above organizations. Except as to Trustees of the Funds and Portfolios who
are not members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to each Fund out of the investment adviser fee
earned by BMR.
5 Distribution Plan
------------------------------------------------------------------------------
Each Fund has adopted a distribution plan (the Plans) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plans require the Funds 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 respective Fund. A 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 (Note 6) and amounts theretofore paid to EVD. The amount payable to
EVD with respect to each day is accrued on such day as a liability of each
Fund and, accordingly, reduces the Fund's net assets. For the year ended
August 31, 1997, Marathon Alabama Fund, Marathon Arkansas Fund, Marathon
Georgia Fund, Marathon Kentucky Fund, Marathon Louisiana Fund, Marathon
Maryland Fund, Marathon Missouri Fund, Marathon North Carolina Fund, Marathon
Oregon Fund, Marathon South Carolina Fund, Marathon Tennessee Fund and
Marathon Virginia Fund, paid $748,958, $505,535, $749,174, $947,316, $245,302,
$807,995, $597,807, $1,216,538, $903,413, $415,306, $398,695 and $1,270,185,
respectively, to EVD, representing 0.75% of average daily net assets. At
August 31, 1997, the amount of Uncovered Distribution Charges of EVD
calculated under the Plans for Marathon Alabama Fund, Marathon Arkansas Fund,
Marathon Georgia Fund, Marathon Kentucky Fund, Marathon Louisiana Fund,
Marathon Maryland Fund, Marathon Missouri Fund, Marathon North Carolina Fund,
Marathon Oregon Fund, Marathon South Carolina Fund, Marathon Tennessee Fund
and Marathon Virginia Fund were approximately $3,021,000, $2,138,000,
$3,009,000, $3,655,000, $1,194,000, $3,418,000, $2,301,000, $4,749,000,
$3,587,000, $1,855,000, $1,690,000 and $4,789,000, respectively.
43
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
In addition, the Plans authorize the Funds to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of each Fund's average daily net assets for any fiscal year.
The Trustees have initially implemented the Plans by authorizing the Funds to
make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed 0.20% per annum of each
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. For the year ended
August 31, 1997, Marathon Alabama Fund, Marathon Arkansas Fund, Marathon
Georgia Fund, Marathon Kentucky Fund, Marathon Louisiana Fund, Marathon
Maryland Fund, Marathon Missouri Fund, Marathon North Carolina Fund, Marathon
Oregon Fund, Marathon South Carolina Fund, Marathon Tennessee Fund and
Marathon Virginia Fund paid or accrued service fees to or payable to EVD in
the amount of $190,434, $123,302, $190,458, $238,419, $55,115, $197,101,
$143,474, $296,401, $212,791, $99,175, $94,335 and $317,447, respectively.
Service fee payments are made for personal services and/or 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 each 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.
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 or clients. CDSC charges are paid to EVD to reduce the amount of
Uncovered Distribution Charges calculated under each 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 $296,000,
$341,000, $466,000, $404,000, $128,000, $296,000, $231,000, $555,000,
$527,000, $220,000, $163,000 and $535,000 of CDSC paid by shareholders of
Marathon Alabama Fund, Marathon Arkansas Fund, Marathon Georgia Fund, Marathon
Kentucky Fund, Marathon Louisiana Fund, Marathon Maryland Fund, Marathon
Missouri Fund, Marathon North Carolina Fund, Marathon Oregon Fund, Marathon
South Carolina Fund, Marathon Tennessee Fund and Marathon Virginia Fund,
respectively, for the year ended August 31, 1997.
7 Investment Transactions
------------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended August 31, 1997 were as follows:
<TABLE>
<S> <C>
Marathon Alabama Fund
------------------------------------------------------------------------------
Increases $ 4,154,567
Decreases 19,096,231
Marathon Arkansas Fund
------------------------------------------------------------------------------
Increases $ 1,626,790
Decreases 18,904,327
Marathon Georgia Fund
------------------------------------------------------------------------------
Increases $ 4,748,022
Decreases 27,709,188
Marathon Kentucky Fund
------------------------------------------------------------------------------
Increases $ 4,241,615
Decreases 26,747,510
Marathon Louisiana Fund
------------------------------------------------------------------------------
Increases $ 2,559,014
Decreases 6,581,023
Marathon Maryland Fund
------------------------------------------------------------------------------
Increases $ 6,104,591
Decreases 19,736,991
Marathon Missouri Fund
------------------------------------------------------------------------------
Increases $ 2,093,853
Decreases 15,224,366
Marathon North Carolina Fund
------------------------------------------------------------------------------
Increases $ 4,952,386
Decreases 38,344,775
</TABLE>
44
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<S> <C>
Marathon Oregon Fund
------------------------------------------------------------------------------
Increases $ 5,598,598
Decreases 31,172,132
Marathon South Carolina Fund
------------------------------------------------------------------------------
Increases $ 2,166,578
Decreases 11,752,710
Marathon Tennessee Fund
------------------------------------------------------------------------------
Increases $ 2,428,524
Decreases 10,553,674
Marathon Virginia Fund
------------------------------------------------------------------------------
Increases $ 6,820,356
Decreases 38,471,448
</TABLE>
8 Subsequent Event
------------------------------------------------------------------------------
Effective September 1, 1997, the EV Marathon Alabama Municipals Fund, EV
Marathon Arkansas Municipals Fund, EV Marathon Georgia Municipals Fund, EV
Marathon Kentucky Municipals Fund, EV Marathon Louisiana Municipals Fund, EV
Marathon Maryland Municipals Fund, EV Marathon Missouri Municipals Fund, EV
Marathon North Carolina Municipals Fund, EV Marathon Oregon Municipals Fund,
EV Marathon South Carolina Municipals Fund, EV Marathon Tennessee Municipals
Fund and EV Marathon Virginia Municipals Fund will change their respective
names to Eaton Vance Alabama Municipals Fund, Eaton Vance Arkansas Municipals
Fund, Eaton Vance Georgia Municipals Fund, Eaton Vance Kentucky Municipals
Fund, Eaton Vance Louisiana Municipals Fund, Eaton Vance Maryland Municipals
Fund, Eaton Vance Missouri Municipals Fund, Eaton Vance North Carolina
Municipals Fund, Eaton Vance Oregon Municipals Fund, Eaton Vance South
Carolina Municipals Fund, Eaton Vance Tennessee Municipals Fund and Eaton
Vance Virginia Municipals Fund and shares of the Funds will be designated
Class B Shares. One additional class of shares will also be offered.
45
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders
of Eaton Vance Municipals Trust
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of EV
Marathon Alabama Municipals Fund, EV Marathon Arkansas Municipals Fund, EV
Marathon Georgia Municipals Fund, EV Marathon Kentucky Municipals Fund, EV
Marathon Louisiana Municipals Fund, EV Marathon Maryland Municipals Fund, EV
Marathon Missouri Municipals Fund, EV Marathon North Carolina Municipals Fund,
EV Marathon Oregon Municipals Fund, EV Marathon South Carolina Municipals Fund,
EV Marathon Tennessee Municipals Fund and EV Marathon Virginia Municipals Fund
(the Funds) (certain of the series of Eaton Vance Municipals Trust) as of August
31, 1997, the related statements of operations for the year then ended, and the
statements of changes in net assets for the years ended August 31, 1997 and 1996
and financial highlights for each of the years in the four-year period ended
August 31, 1997, and each of the years in the two-year period ended September
30, 1993. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on the financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the aforementioned
Funds of Eaton Vance Municipals Trust at August 31, 1997, the results of their
operations, the changes in their net assets and their financial highlights for
the respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 10, 1997
46
<PAGE>
Alabama Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Electric Utilities -- 0.7%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa1 BBB+ $ 500 Puerto Rico Electric Power
Authority, 6.38%, 7/1/24 $ 544,675
Baa1 BBB+ 180 Puerto Rico Electric Power
Authority, 7.00%, 7/1/07 192,544
- --------------------------------------------------------------------------------
$ 737,219
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 4.7%
- --------------------------------------------------------------------------------
NR BBB $ 350 Gadsen East, AL Medical
Clinic Board (Baptist
Hospital), 7.60%, 11/1/08 $ 397,712
NR BBB 2,000 Gadsen East, AL Medical
Clinic Board (Baptist
Hospital), 7.80%, 11/1/21 2,287,740
Baa1 BBB+ 320 Puerto Rico Electric Power
Authority, 7.00%, 7/1/07 341,325
A1 NR 1,600 University of Alabama
Birmingham Medical and
Educational Foundation
Housing, 7.00%, 12/1/19 1,727,152
- --------------------------------------------------------------------------------
$ 4,753,929
- --------------------------------------------------------------------------------
Hospitals -- 13.7%
- --------------------------------------------------------------------------------
Aa AA $1,250 Alabama Special Care
(Daughters of Charity),
5.00%, 11/1/25 $ 1,140,938
NR BBB 3,000 Alexander City, AL Special
Care (Russell Hospital),
6.00%, 12/1/22 3,046,740
Baa3 BBB- 1,000 Baldwin County, AL (Thomas
Hospital), 6.75%, 4/1/21 1,077,270
Baa3 NR 1,000 Cullman, AL Medical Clinic
Board (Cullman Regional
Medical Center), 6.50%,
2/15/23 1,031,810
A3 NR 3,550 Jasper, AL Medical Clinic
Board (Walker Regional
Medical Center), 6.38%,
7/1/18/(1)/ 3,646,630
A3 NR 1,000 Jasper, AL Medical Clinic
Board (Walker Regional
Medical Center), 6.40%,
7/1/11 1,034,290
Baa3 BBB 2,000 Marshall, AL
(Boaz-Albertville Medical
Center), 7.00%, 1/1/20 2,156,020
A A- 745 Montgomery, AL Medical
Clinic Board (Jackson
Hospital), 7.00%, 3/1/15 791,384
- --------------------------------------------------------------------------------
$ 13,925,082
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 13.4%
- --------------------------------------------------------------------------------
A2 NR $1,000 Commonwealth of Puerto
Rico Industrial, Medical
and Environmental
Pollution Control Facility
Finance Authority
(American Home Products),
5.10%, 12/1/18 $ 961,040
Baa1 BBB 1,200 Courtland, AL (Champion
International Corporation),
7.20%, 12/1/13 1,330,440
Baa1 BBB 2,000 Courtland, AL (Champion
International Corporation),
(AMT), 6.50%, 9/1/25 2,127,000
Baa1 BBB 800 Courtland, AL (Champion
International Corporation),
(AMT), 7.00%, 6/1/22 866,432
Baa3 BBB- 2,000 Mobile, AL (Mobile Energy),
6.95%, 1/1/20 2,178,280
Baa3 BBB- 2,780 Puerto Rico Port Authority
(American Airlines),
6.25%, 6/1/26 2,954,278
A3 A- 1,000 Selma, AL Solid Waste
Disposal, (AMT), 6.00%,
12/1/17 1,015,030
A2 A+ 2,000 Tallahassee, AL (United
Tech), 6.10%, 8/1/14 2,116,280
- --------------------------------------------------------------------------------
$ 13,548,780
- --------------------------------------------------------------------------------
Insured-Education -- 7.5%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Alabama A&M University
(MBIA), 6.38%, 11/1/09 $ 1,092,730
Aaa AAA 4,000 University of Alabama
Student Housing (MBIA),
5.00%, 6/1/16 3,816,959
Aaa AAA 2,770 University of South
Alabama Tuition (AMBAC),
5.00%, 11/15/15 2,673,466
- --------------------------------------------------------------------------------
$ 7,583,155
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 2.4%
- --------------------------------------------------------------------------------
Aaa AAA $2,000 Columbia, AL (AL Power)
(AMBAC), 6.50%, 9/1/23 $ 2,119,620
</TABLE>
See notes to financial statements
47
<PAGE>
Alabama Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Electric Utilities (continued)
- ---------------------------------------------------------------------------
Aaa AAA $ 250 Commonwealth of Puerto
Rico Electric Power
Authority STRIPES (FSA),
Variable Rate, 7/1/03 /(2)/ $ 279,063
- ---------------------------------------------------------------------------
$ 2,398,683
- ---------------------------------------------------------------------------
Insured-General Obligations -- 12.3%
- ---------------------------------------------------------------------------
Aaa AAA $3,000 Daphne, AL (AMBAC),
5.13%, 4/1/17 $ 2,876,370
Aaa AAA 250 Fairfield City, AL
(AMBAC), 6.30%, 6/1/22 270,968
Aaa AAA 1,400 Greenville, AL (AMBAC),
5.25%, 12/1/21 1,358,784
Aaa AAA 1,000 Hamilton, AL (MBIA),
5.25%, 8/1/22 970,210
Aaa AAA 2,065 Hoover, AL (AMBAC),
5.00%, 3/1/20 1,942,773
Aaa AAA 3,250 Madison, AL School
Warrants (MBIA), 6.00%,
2/1/24 3,411,785
Aaa AAA 1,000 North Port, AL (AMBAC),
5.70%, 3/1/21 1,024,620
Aaa AAA 500 Troy City, AL (CAPG),
6.60%, 6/1/12 552,500
- ---------------------------------------------------------------------------
$ 12,408,010
- ---------------------------------------------------------------------------
Insured-Hospitals -- 9.9%
- ---------------------------------------------------------------------------
Aaa AAA $1,810 Bessemer, AL Medical
Clinic Board (MBIA),
6.00%, 5/15/19 $ 1,894,292
Aaa AAA 2,000 Birmingham, AL Special Tax
Care Facilities Authority
(Children's Hospital)
(MBIA), 5.38%, 6/1/17 1,979,420
Aaa AAA 2,000 Huntsville, AL Health Care
Facilities (MBIA), 6.50%,
6/1/13 2,228,440
Aaa AAA 2,500 Montgomery, AL Special Tax
Care Facilities Authority,
(Baptist Medical Center)
(FSA), 5.38%, 9/1/22 /(3)/ 2,451,150
Aaa AAA 1,500 University of Alabama
Hospital Revenue -
Birmingham (MBIA), 5.00%,
10/1/14 1,449,750
- ---------------------------------------------------------------------------
$ 10,003,052
- ---------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 0.9%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Puerto Rico Public
Buildings Authority
(AMBAC), 5.00%, 7/1/27 $ 946,620
- ---------------------------------------------------------------------------
$ 946,620
- ---------------------------------------------------------------------------
Insured-Miscellaneous -- 5.3%
- ---------------------------------------------------------------------------
Aaa AAA $4,500 Alabama State Docks
Department (MBIA), (AMT),
6.30%, 10/1/21 $ 4,780,259
Aaa AAA 1,825 Birmingham Jefferson, AL
Civic Center Authority
(MBIA), 0.00%, 9/1/18 574,364
- ---------------------------------------------------------------------------
$ 5,354,623
- ---------------------------------------------------------------------------
Insured-Solid Waste -- 4.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 350 Huntsville, AL Solid Waste
Disposal (FGIC), (AMT),
7.00%, 10/1/08 $ 379,456
Aaa AAA 4,000 Huntsville, AL Solid Waste
Disposal (FGIC), (AMT),
7.00%, 10/1/14 4,318,599
- ---------------------------------------------------------------------------
$ 4,698,055
- ---------------------------------------------------------------------------
Insured-Transportation -- 1.0%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Huntsville-Madison County
Airport, AL (AMT), (MBIA),
5.40%, 7/1/19 $ 974,900
- ---------------------------------------------------------------------------
$ 974,900
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 18.1%
- ---------------------------------------------------------------------------
Aaa AAA $1,500 Alabama Water Pollution
Control Authority (AMBAC),
5.00%, 8/15/15 $ 1,424,910
Aaa AAA 2,050 Bessemer, AL Water
(AMBAC), 5.75%, 7/1/26 2,099,672
Aaa AAA 1,000 Fort Payne, AL Waterworks
Board (MBIA), 5.25%, 7/1/26 962,580
Aaa AAA 2,000 Jefferson County, AL Sewer
Revenue (FGIC), 5.38%,
2/1/27 1,966,520
Aaa AAA 3,075 Prichard, AL Water and
Sewer (AMBAC), 6.13%,
11/15/14 3,266,911
Aaa AAA 6,000 Scottsboro, AL Water, Sewer
and Gas (AMBAC), 6.50%,
12/1/14 /(4)/ 6,654,419
</TABLE>
See notes to financial statements
48
<PAGE>
Alabama Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Water and Sewer (continued)
- --------------------------------------------------------------------------
Aaa AAA $ 750 West Morgan-East Lawrence,
AL Water Authority (FGIC),
6.00%, 5/1/22 $ 772,028
Aaa AAA 1,000 West Morgan-East Lawrence,
AL Water Authority (FSA),
6.85%, 8/15/25 1,147,600
- --------------------------------------------------------------------------
$ 18,294,640
- --------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 0.5%
- --------------------------------------------------------------------------
NR BBB $ 500 Puerto Rico (Guaynabo
Municipal Government
Center Lease),
5.63%, 7/1/22 $ 493,700
- --------------------------------------------------------------------------
$ 493,700
- --------------------------------------------------------------------------
Miscellaneous -- 0.1%
- --------------------------------------------------------------------------
A A $ 100 Tennessee Valley, AL
Exhibit Commission, 6.70%,
6/1/10 $ 110,480
- --------------------------------------------------------------------------
$ 110,480
- --------------------------------------------------------------------------
Nursing Homes -- 1.0%
- --------------------------------------------------------------------------
NR NR $ 325 Fairhope, AL Midtown
Medical Clinic Board
(Beverly Enterprises),
6.38%, 6/1/09 $ 325,764
NR NR 670 Mobile, AL Midtown Medical
Clinic Board (Beverly
Enterprises),
7.00%, 4/1/07 681,377
- --------------------------------------------------------------------------
$ 1,007,141
- --------------------------------------------------------------------------
Special Tax Revenue -- 0.3%
- --------------------------------------------------------------------------
NR NR $ 250 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 $ 278,275
- --------------------------------------------------------------------------
$ 278,275
- --------------------------------------------------------------------------
Transportation -- 2.1%
- --------------------------------------------------------------------------
NR BBB $2,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 2,138,500
- --------------------------------------------------------------------------
$ 2,138,500
- --------------------------------------------------------------------------
Water and Sewer -- 1.5%
- --------------------------------------------------------------------------
NR NR $1,500 Moulton City, AL Water,
6.30%, 1/1/18 $ 1,536,075
- --------------------------------------------------------------------------
$ 1,536,075
- --------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $94,504,048) $ 101,190,919
- --------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered
a tax preference item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Alabama
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 August 31, 1997, 61.9% of 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 0.6% to 26.4% of total
investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
/(3)/ When-issued security.
/(4)/ Security (or a portion thereof) has been segregated to cover when-issued
securities.
See notes to financial statements
49
<PAGE>
Arkansas Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colleges and Universities -- 4.6%
- --------------------------------------------------------------------------
NR A+ $2,750 Conway, AR Public
Facilities Board Capital
Improvement (Hendrix
College), 6.00%, 10/1/26 $ 2,845,177
- --------------------------------------------------------------------------
$ 2,845,177
- --------------------------------------------------------------------------
Electric Utilities -- 6.4%
- --------------------------------------------------------------------------
A NR $1,000 Conway, AR Electric, 5.70%,
8/1/09 $ 1,032,740
NR NR 1,000 Guam Power Authority,
5.25%, 10/1/23 947,000
Baa2 BBB- 750 Jefferson, AR Pollution
Control (AR Power and
Light), 6.13%, 10/1/07 750,285
Baa2 BBB 550 Jefferson, AR Pollution
Control (AR Power and
Light), 6.30%, 6/1/18 581,565
Baa2 BBB 500 Pope County, AR Pollution
Control (AR Power and
Light), 6.30%, 12/1/16 528,695
Baa1 BBB+ 500 Puerto Rico Electric Power
0.00%, 7/1/17 167,800
- --------------------------------------------------------------------------
$ 4,008,085
- --------------------------------------------------------------------------
Escrowed/Prerefunded -- 1.0%
- --------------------------------------------------------------------------
Aaa AAA $ 500 Harrison, AR Residential
Housing Facility Board
Single Family Mortgage
(FGIC), 7.40%, 9/1/11 $ 612,690
- --------------------------------------------------------------------------
$ 612,690
- --------------------------------------------------------------------------
General Obligations -- 2.9%
- --------------------------------------------------------------------------
Aa3 AA $ 750 Arkansas State College
Savings, 0.00%, 6/1/13 $ 320,235
Aa3 AA 2,750 Arkansas State College
Savings, 0.00%, 6/1/14 1,103,410
Aa3 AA 1,000 Arkansas State College
Savings, 0.00%, 6/1/14 401,240
- --------------------------------------------------------------------------
$ 1,824,885
- --------------------------------------------------------------------------
Hospitals -- 16.1%
- --------------------------------------------------------------------------
Aa1 AA+ $1,750 Arkansas Development
Finance Authority Health
Care Facilities (Sisters of
Mercy), 5.00%, 6/1/19 $ 1,652,350
Baa2 NR 700 Baxter, AR Hospital
Improvement, 7.25%, 9/1/07 757,687
Baa2 NR 750 Baxter, AR Hospital
Improvement, 7.50%, 9/1/21 815,460
NR A 1,000 Little Rock, AR Health
Facilities Board (Baptist
Medical Center-Parkway
Village), 7.00%, 10/1/17 1,084,540
NR A+ 550 Little Rock, AR Health
Facilities Board Healthcare
(Baptist Medical Center),
5.50%, 9/1/15 547,509
NR A+ 1,125 Little Rock, AR Health
Facilities Board Hospital
(Baptist Medical Center),
6.80%, 11/1/05 1,270,575
NR BBB 1,500 Paragould, AR Hospital,
6.38%, 10/1/17 1,574,865
NR A- 2,250 Pulaski County, AR
Hospitals (Children's
Hospital), 6.20%, 3/1/22 2,336,288
- --------------------------------------------------------------------------
$10,039,274
- --------------------------------------------------------------------------
Housing -- 11.0%
- --------------------------------------------------------------------------
A NR $3,000 Arkansas Development
Finance Authority Compound
Accretion, 0.00%, 12/1/11 $ 1,050,780
NR AAA 1,260 Arkansas Development
Finance Authority Single
Family Mortgage (GNMA),
(AMT), 5.80%, 6/1/25 1,267,258
NR AAA 990 Arkansas Development
Finance Authority Single
Family Mortgage (GNMA),
(AMT), 7.45%, 1/1/27 1,084,515
NR AAA 3,270 Arkansas Development
Finance Authority Single
Family Mortgage
(GNMA/FNMA), (AMT),
6.70%, 7/1/27 3,470,352
- --------------------------------------------------------------------------
$ 6,872,905
- --------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 17.0%
- --------------------------------------------------------------------------
NR A- $ 750 Arkansas State Development
Finance Authority Economic
Development, (AMT), 6.00%,
10/1/11 $ 772,178
Baa2 BBB+ 2,350 Baxter, AR (Aeroquip
Corporation), 5.80%, 10/1/13 2,439,300
</TABLE>
See notes to financial statements
50
<PAGE>
Arkansas Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development Revenue / Pollution Control
Revenue (continued)
- ---------------------------------------------------------------------------
A1 AA- $2,500 Blytheville, AR Solid Waste
Recycling and Sewer
Treatment (Nucor
Corporation), (AMT),
6.90%, 12/1/21 $ 2,702,775
A3 A- 735 Gurdon, AR Pollution
Control (International
Paper), 5.75%, 2/1/08 735,228
A1 A+ 1,000 Jonesboro, AR (Anheuser-
Busch), 6.50%, 11/15/12 1,079,270
A3 A- 775 Pine Bluff, AR Solid Waste
Disposal (International
Paper), (AMT), 5.55%, 10/1/17 773,373
Baa3 BBB- 1,990 Puerto Rico Port Authority
(American Airlines), (AMT),
6.30%, 6/1/23 2,093,062
- ---------------------------------------------------------------------------
$10,595,186
- ---------------------------------------------------------------------------
Insured-Education -- 0.9%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 University of Central
Arkansas (AMBAC), 6.13%,
4/1/26 $ 535,165
- ---------------------------------------------------------------------------
$ 535,165
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 9.3%
- ---------------------------------------------------------------------------
Aaa AAA $ 450 Commonwealth of Puerto Rico
Electric Power Authority
STRIPES (FSA), Variable
Rate, 7/1/03 /(1)/ $ 502,313
Aaa AAA 250 North Little Rock, AR
Electric System (MBIA),
6.50%, 7/1/10 286,220
Aaa AAA 3,390 North Little Rock, AR
Electric System (MBIA),
6.50%, 7/1/15 /(2)/ 3,887,278
Aaa AAA 1,000 West Memphis, AR Public
Utilities System (MBIA),
6.60%, 1/1/09 1,101,480
- ---------------------------------------------------------------------------
$ 5,777,291
- ---------------------------------------------------------------------------
Insured-Hospitals -- 5.9%
- ---------------------------------------------------------------------------
Aaa AAA $2,610 Jonesboro, AR Residential
Housing and Health Care
Facilities Board Hospital
(Saint Bernard Regional
Medical Center) (AMBAC),
5.90%, 7/1/16 $ 2,713,616
Aaa AAA 400 Saline County, AR
Retirement Housing and
Healthcare Facilities Board
(Evan Lutheran Good
Samaritan) (AMBAC), 5.80%,
5/1/11 419,708
Aaa AAA 500 Saline County, AR
Retirement Housing and
Healthcare Facilities Board
(Evan Lutheran Good
Samaritan) (AMBAC), 6.00%,
6/1/18 519,075
- ---------------------------------------------------------------------------
$ 3,652,399
- ---------------------------------------------------------------------------
Insured-Transportation -- 0.8%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Little Rock, AR Municipal
Airport (MBIA), 6.00%,
11/1/14 $ 517,210
- ---------------------------------------------------------------------------
$ 517,210
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 5.6%
- ---------------------------------------------------------------------------
Aaa AAA $1,500 Arkansas Development
Finance Authority
Wastewater System (MBIA),
5.00%, 6/1/15 $ 1,448,505
Aaa AAA 1,250 Arkansas Development
Finance Authority
Wastewater System (MBIA),
5.40%, 12/1/15 1,256,663
Aaa AAA 300 Beaver, AR Water District
(MBIA), 5.85%, 11/15/08 317,487
Aaa NR 500 Texarkana, AR Water and
Sewer, (FGIC), 5.40%, 9/1/15 500,535
- ---------------------------------------------------------------------------
$ 3,523,190
- ---------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 0.4%
- ---------------------------------------------------------------------------
NR BBB $ 250 Puerto Rico (Guaynabo
Municipal Government Center
Lease),
5.63%, 7/1/22 $ 246,850
- ---------------------------------------------------------------------------
$ 246,850
- ---------------------------------------------------------------------------
Pooled Loans -- 2.8%
- ---------------------------------------------------------------------------
A NR $1,000 Arkansas State Student Loan
Authority, (AMT), 6.25%,
6/1/10 $ 1,038,090
A NR 610 Arkansas State Student Loan
Authority, (AMT), 7.25%,
6/1/09 685,658
- ---------------------------------------------------------------------------
$ 1,723,748
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
51
<PAGE>
Arkansas Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Tax Revenue -- 6.0%
- --------------------------------------------------------------------------------
Baa1 A $ 500 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.00%, 7/1/36 $ 463,795
A NR 2,000 Little Rock, AR Hotel and
Restaurant Gross Receipts
Tax, 7.38%, 8/1/15 2,436,800
NR NR 750 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 834,825
- --------------------------------------------------------------------------------
$ 3,735,420
- --------------------------------------------------------------------------------
Transportation -- 1.2%
- --------------------------------------------------------------------------------
NR NR $ 750 Northwest Arkansas Regional
Airport Authority, (AMT),
7.63%, 2/1/27 $ 753,908
- --------------------------------------------------------------------------------
$ 753,908
- --------------------------------------------------------------------------------
Water and Sewer -- 8.1%
- --------------------------------------------------------------------------------
NR NR $1,000 Cross, AR Rural Water,
5.75%, 4/1/18 $ 1,004,010
A1 NR 2,500 Little Rock, AR Sewer,
5.50%, 8/1/14 2,517,325
NR NR 1,500 South Sebastian County, AR
Water Users Association,
6.15%, 6/1/23 1,542,180
- --------------------------------------------------------------------------------
$ 5,063,515
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $58,959,622) $62,326,898
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Arkansas
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 August 31, 1997, 22.7% 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 by financial
institution ranged from 0.8% to 14.1% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
52
<PAGE>
Georgia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Electric Utilities -- 13.9%
- --------------------------------------------------------------------------------
A1 A $ 2,000 Burke County, Development
Authority Pollution Control
(Georgia Power), 6.38%,
8/1/24 $ 2,071,200
A3 A 1,000 Georgia Municipal Electric
Power Authority, 0.00%,
1/1/12 454,860
A3 A 2,000 Georgia Municipal Electric
Power Authority, 8.25%,
1/1/11 2,543,380
A1 A+ 1,000 Monroe County, Development
Authority Pollution Control
(Gulf Power Scherer),
6.30%, 9/1/24 1,038,350
A3 A 4,000 Monroe County, Development
Authority Pollution Control
(Ogelthorpe Power), 6.55%,
1/1/06 4,416,799
A3 A 1,000 Monroe County, Development
Authority Pollution Control
(Ogelthorpe Power), 6.70%,
1/1/09 1,140,570
A3 A 1,000 Monroe County, Development
Authority Pollution Control
(Ogelthorpe Power), 6.80%,
1/1/12 1,152,190
Baa1 BBB+ 665 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 223,174
- --------------------------------------------------------------------------------
$13,040,523
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 305 Chatham County, Memorial
Medical Center (MBIA),
6.85%, 1/1/21 $ 334,271
Aaa AAA 675 Chatham County, Memorial
Medical Center (MBIA),
7.00%, 1/1/21 742,892
- --------------------------------------------------------------------------------
$ 1,077,163
- --------------------------------------------------------------------------------
General Obligations -- 6.2%
- --------------------------------------------------------------------------------
Aa AA- $ 300 City of Alpharetta,
6.50%, 5/1/10/(1)/ $ 342,447
Baa1 A 1,875 Commonwealth of Puerto Rico
Aqueduct and Sewer
Authority, 5.00%, 7/1/19 1,752,019
Baa1 A 1,000 Commonwealth of Puerto Rico
Aqueduct and Sewer
Authority, 6.25%, 6/1/12 1,112,520
Aa1 AA+ 1,480 Gwinnett County, Water and
Sewer, 6.50%, 8/1/06 1,483,138
A2 A 450 Paulding County School
District, 6.63%, 2/1/08 514,724
Aaa AAA 500 State of Georgia, 6.30%,
3/1/08/(1)/ 564,400
- --------------------------------------------------------------------------------
$ 5,769,248
- --------------------------------------------------------------------------------
Hospitals -- 10.9%
- --------------------------------------------------------------------------------
A2 NR $4,500 City of Savannah (Saint
Josephs Hospital Project),
6.20%, 7/1/23 $ 4,637,384
Baa1 NR 3,500 Fulco County, Georgia
Baptist Health, 6.38%,
9/1/22 3,621,624
NR BBB 1,785 Toombs County, GA (Dr. John
M. Meadows Memorial),
7.00%, 12/1/17 1,920,107
- --------------------------------------------------------------------------------
$10,179,115
- --------------------------------------------------------------------------------
Housing -- 14.4%
- --------------------------------------------------------------------------------
Aa2 NR $1,450 Georgia Housing and Finance
Authority, (AMT), 6.88%,
12/1/20 $ 1,520,267
Aa2 AA+ 3,985 Georgia Housing and Finance
Authority, Single Family
Mortgage, FHA, (AMT),
6.55%, 12/1/27 4,186,162
Aa2 AA+ 2,395 Georgia Housing and Finance
Authority, Single Family
Mortgage, FHA, (AMT),
6.70%, 12/1/25 2,529,072
Aa2 AA+ 1,500 Georgia Housing and Finance
Authority, Single Family
Mortgage, FHA, (AMT),
7.05%, 12/1/20 1,596,180
Aa2 AA+ 1,555 Georgia Housing and Finance
Authority, Single Family
Mortgage, FHA, (AMT),
7.12%, 12/1/26 1,644,848
Aa2 AA+ 2,000 Georgia State Housing &
Finance Authority Revenue,
(AMT), 5.85%, 12/1/28 2,015,020
- --------------------------------------------------------------------------------
$13,491,549
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 10.1%
- --------------------------------------------------------------------------------
A1 A+ $1,000 Cartersville Development
Authority,
(Anheuser-Busch), (AMT),
6.13%, 5/1/27 $ 1,033,460
A1 A+ 1,000 Cartersville Development
Authority,
(Anheuser-Busch), (AMT),
7.38%, 5/1/09 1,200,410
</TABLE>
See notes to financial statements
53
<PAGE>
Georgia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development Revenue /
Pollution Control Revenue (continued)
- ---------------------------------------------------------------------------
Baa3 BBB- $2,250 Puerto Rico Port Authority
(American Airlines), 6.25%,
6/1/26 $ 2,391,053
NR A+ 500 Savannah Economic
Development Authority
(Hershey Foods),
6.60%, 6/1/12 543,230
NR NR 1,250 Savannah Economic
Development Authority
(Intercat Incorporated),
(AMT), 9.00%, 1/1/15 1,356,425
A1 A- 750 Savannah Economic
Development Authority
(Union Camp Corporation),
6.80%, 2/1/12 814,830
NR AA- 2,000 Vienna Water and Sewer
(Cargill Project), (AMT),
6.00%, 9/1/14 2,079,800
- ---------------------------------------------------------------------------
$ 9,419,208
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 5.9%
- ---------------------------------------------------------------------------
Aaa AAA $ 900 Commonwealth of Puerto Rico
Electric Power Authority
STRIPES (FSA), Variable
Rate, 7/1/03 /(2)/ $ 1,004,625
Aaa AAA 1,000 Georgia Municipal Electric
Power Authority (FGIC),
5.50%, 1/1/12 1,039,740
Aaa AAA 750 Georgia Municipal Electric
Power Authority (MBIA),
0.00%, 1/1/07 474,623
Aaa AAA 3,000 Georgia Municipal Electric
Power Authority (MBIA),
5.50%, 1/1/20 3,046,230
- ---------------------------------------------------------------------------
$ 5,565,218
- ---------------------------------------------------------------------------
Insured-General Obligations -- 0.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Commonwealth of Puerto Rico
"RIBS" (AMBAC), Variable
Rate, 7/1/15 /(2)/ $ 536,875
- ---------------------------------------------------------------------------
$ 536,875
- ---------------------------------------------------------------------------
Insured-Hospitals -- 18.4%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Chatham County (MBIA),
5.50%, 1/1/21 $ 992,130
Aaa AAA 1,600 Clarke County, Hospital
Authority (MBIA), 5.00%,
1/1/27 1,486,224
Aaa AAA 1,300 Cobb County, Hospital
Authority, Kennestone
Hospital (MBIA),
5.00%, 4/1/24 1,209,676
Aaa AAA 2,225 Gainsville and Hall County,
(North East Healthcare)
(MBIA), 6.00%, 10/1/25 2,327,684
Aaa AAA 1,500 Gwinnett County, Gwinnett
Hospital (AMBAC), 5.00%,
9/1/13 1,461,315
Aaa AAA 2,000 Liberty County (MBIA),
5.25%, 8/1/21 1,931,240
Aaa AAA 2,500 Macon-Bibb County, Medical
Center
of Central Georgia (FGIC),
5.00%, 8/1/14 2,419,475
Aaa AAA 1,500 Medical Center Hospital
Authority Floats (MBIA),
Variable Rate, 8/1/10 /(2)/ 1,723,125
Aaa AAA 2,000 Medical Center, Columbus
Regional Healthcare (MBIA),
6.40%, 8/1/06 2,187,000
Aaa AAA 1,375 Walker, Dade and Catoosa
Counties Hospital (FGIC),
7.00%, 10/1/10 1,519,485
- ---------------------------------------------------------------------------
$17,257,354
- ---------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 1.1%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 East Point Building
Authority (FGIC), 6.00%,
2/1/10 $ 1,065,880
- ---------------------------------------------------------------------------
$ 1,065,880
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.4%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Metropolitan Atlanta Rapid
Transit Authority, (AMBAC),
6.25%, 7/1/11 $ 1,122,630
Aaa AAA 1,000 Metropolitan Atlanta Rapid
Transit Authority, (AMBAC),
6.25%, 7/1/20 1,123,450
- ---------------------------------------------------------------------------
$ 2,246,080
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 3.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,975 Cherokee County, Water and
Sewer Authority (MBIA),
6.88%, 8/1/13 $ 2,169,775
Aaa AAA 1,000 City of Atlanta, Water and
Sewer (FGIC), 5.00%, 1/1/15 966,180
- ---------------------------------------------------------------------------
$ 3,135,955
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
54
<PAGE>
Georgia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease Revenue / Certificates of Participation -- 1.3%
- -------------------------------------------------------------------------
Aa AA $2,300 Fulton County, Building
Authority, Judicial Center,
0.00%, 1/1/10 $ 1,212,008
- -------------------------------------------------------------------------
$ 1,212,008
- -------------------------------------------------------------------------
Life Care -- 1.4%
- -------------------------------------------------------------------------
NR NR $1,500 De Kalb County, Private
Hospital Authority (Atlanta
Incorporated), 8.50%, 3/1/25 $ 1,348,260
- -------------------------------------------------------------------------
$ 1,348,260
- -------------------------------------------------------------------------
Miscellaneous -- 1.1%
- -------------------------------------------------------------------------
NR NR $1,000 City of Atlanta, Downtown
Development Authority
Childcare Facilities
(Central Atlanta
Hospitality Childcare,
Incorporated), 8.00%, 1/1/26 $ 1,015,760
- -------------------------------------------------------------------------
$ 1,015,760
- -------------------------------------------------------------------------
Solid Waste -- 1.1%
- -------------------------------------------------------------------------
A1 A+ $1,000 Savannah Resource Recovery
(Savannah Energy Systems
Company), 6.30%, 12/1/06 $ 1,065,200
- -------------------------------------------------------------------------
$ 1,065,200
- -------------------------------------------------------------------------
Special Tax Revenue -- 6.7%
- -------------------------------------------------------------------------
Baa1 A $3,750 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.00%, 7/1/36 $ 3,478,462
Baa1 A 1,250 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.50%, 7/1/36 1,239,975
NR NR 1,400 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 1,558,340
- -------------------------------------------------------------------------
$ 6,276,777
- -------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $87,597,730) $93,702,173
- -------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Georgia
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 August 31, 1997, 33.0% of securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 1.1% to 19.9% of total investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
See notes to financial statements
55
<PAGE>
Kentucky Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 2.7%
- ---------------------------------------------------------------------------
Aa NR $3,000 Kenton County, KY
(Highland Terrace) FHA,
6.95%, 12/1/26 $ 3,315,359
- ---------------------------------------------------------------------------
$ 3,315,359
- ---------------------------------------------------------------------------
Education -- 1.1%
- ---------------------------------------------------------------------------
A1 AA- $ 500 University of Kentucky
Consolidated Educational
Buildings,
6.40%, 5/1/09 $ 534,160
A1 AA- 785 University of Kentucky
Consolidated Educational
Buildings,
6.40%, 5/1/11 838,631
- ---------------------------------------------------------------------------
$ 1,372,791
- ---------------------------------------------------------------------------
Electric Utilities -- 4.5%
- ---------------------------------------------------------------------------
NR BBB $ 400 Guam Power Authority,
5.25%, 10/1/23 $ 378,800
Aa2 AA- 1,000 Muhlenburg County, KY
Collateralized Pollution
Control, Utilities
Company, 6.25%, 2/1/18 1,046,940
Baa1 BBB+ 3,500 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 1,174,600
Baa1 BBB+ 500 Puerto Rico Electric Power
Authority, 5.50%, 7/1/25 494,340
Baa1 BBB+ 2,250 Puerto Rico Electric Power
Authority, 6.375%, 7/1/24 2,451,038
- ---------------------------------------------------------------------------
$ 5,545,718
- ---------------------------------------------------------------------------
Escrowed / Prerefunded -- 1.5%
- ---------------------------------------------------------------------------
NR NR $ 190 Kentucky Development
Finance Authority, Saint
Claire Medical Center,
7.13%, 9/1/21 $ 211,683
Aaa NR 510 Lexington-Fayette County,
KY Government Public
Facilities,
6.40%, 4/1/12 560,184
Aaa A 1,000 University of Puerto Rico
Revenue, 6.50%, 6/1/13 1,020,790
- ---------------------------------------------------------------------------
$ 1,792,657
- ---------------------------------------------------------------------------
General Obligations -- 4.0%
- ---------------------------------------------------------------------------
Baa1 A $ 500 Commonwealth of Puerto
Rico, 5.40%, 7/1/25 $ 487,315
Baa1 A 3,000 Commonwealth of Puerto
Rico Aqueduct and Sewer
Authority, 5.00%,
7/1/19 /(1)/ 2,803,230
NR A+ 1,030 Kentucky League of Cities
Funding Trust Floating
Indebtedness Certificates
of Participation,
6.15%, 8/1/13 1,097,558
NR NR 500 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 556,550
- ---------------------------------------------------------------------------
$ 4,944,653
- ---------------------------------------------------------------------------
Hospitals -- 0.9%
- ---------------------------------------------------------------------------
Baa1 BBB $ 975 Russell County, KY
Franciscan Sisters of the
Poor Health System,
8.10%, 7/1/15 $ 1,145,976
- ---------------------------------------------------------------------------
$ 1,145,976
- ---------------------------------------------------------------------------
Housing -- 6.6%
- ---------------------------------------------------------------------------
NR AAA $1,455 Boone County, KY
Multifamily Housing
Mortgage, Walnut Creek
Apartments, FHA, 7.00%,
1/1/27 $ 1,526,717
NR NR 1,200 Florence, KY Housing
Facilities (Blue Grass
Housing), 7.625%, 5/1/27 1,206,708
Aaa AAA 2,000 Kentucky Housing Corp.,
SFMR, Series 97B, 6.25%,
7/1/28 2,077,440
Aaa AAA 2,500 Kentucky Housing
Corporation, Multifamily
Mortgage, 6.30%, 1/1/28 2,591,150
Aaa AAA 640 Kentucky Housing
Corporation, Single Family
Mortgage, FHA, (AMT),
7.45%, 1/1/23 679,040
- ---------------------------------------------------------------------------
$ 8,081,055
- ---------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 22.5%
- ---------------------------------------------------------------------------
Baa1 NR $2,425 Ashland, KY Solid Waste
Disposal (Ashland Oil),
(AMT), 7.125%, 2/1/22 $ 2,699,486
</TABLE>
See notes to financial statements
56
<PAGE>
Kentucky Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development Revenue /
Pollution Control Revenue (continued)
- ---------------------------------------------------------------------------
Baa1 BBB $2,355 Ashland, KY Solid Waste
Disposal (Ashland Oil),
(AMT), 7.20%, 10/1/20 $ 2,568,175
NR NR 1,000 City of Elsmmere, KY
(Courtaulds Pkg Inc.),
6.75%, 4/1/10 1,054,840
A2 NR 2,665 Commonwealth of Puerto
Rico Industrial, Medical
and Environmental
Pollution Control Facility
Finance Authority
(American Home Products),
5.10%, 12/1/18 2,561,172
NR NR 3,075 Fulton County, KY
Industrial Building, (Chic
Jeans), (AMT),
7.50%, 2/1/10 3,182,687
NR A- 2,370 Hancock County, KY Solid
Waste Disposal
(Williamette Corporation),
(AMT), 6.60%, 5/1/26 2,568,156
NR NR 1,500 Hancock County, KY,
(Southwire Co.), (AMT),
7.75%, 7/1/26 1,584,600
Baa2 BBB- 3,000 Henderson County, KY Solid
Waste Disposal (MacMillan
Bloedel), (AMT), 7.00%,
3/1/25 3,289,290
Aa3 AA- 1,000 Jefferson County, KY
Pollution Control (E.I. du
Pont de Nemours), 6.30%,
7/1/12 1,093,580
NR BB- 985 Owensboro County, KY
(KMart Corporation),
6.80%, 12/1/07 1,036,900
NR NR 1,500 Perry County, Solid Waste
Disposal (TJI
International), 6.80%,
5/1/26 1,597,665
NR BB- 915 Powderly, KY (KMart
Corporation), 6.90%, 3/1/07 973,258
A1 A 2,820 Wickliffe, KY Solid Waste
Disposal (Westvaco
Corporation), (AMT),
6.375%, 4/1/26 2,996,786
Baa3 NR 500 Winchester County, KY
(Kroger Corporation),
6.90%, 7/1/01 519,475
- ---------------------------------------------------------------------------
$ 27,726,070
- ---------------------------------------------------------------------------
Insured-Education -- 0.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 700 Northern, KY University
Educational Buildings
(AMBAC),
6.25%, 5/1/12 $ 753,193
- ---------------------------------------------------------------------------
$ 753,193
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 1.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,600 Commonwealth of Puerto
Rico, Telephone Authority
(MBIA), Variable Rate,
1/16/15 /(2)/ $ 1,602,000
- ---------------------------------------------------------------------------
$ 1,602,000
- ---------------------------------------------------------------------------
Insured-General Obligations -- 1.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,695 Jefferson County, KY
School District Finance
Corporation (FSA),
5.125%, 11/1/15 $ 1,660,337
- ---------------------------------------------------------------------------
$ 1,660,337
- ---------------------------------------------------------------------------
Insured-Hospitals -- 11.1%
- ---------------------------------------------------------------------------
Aaa AAA $2,500 Daviess County, KY ODCH
Incorporated (MBIA),
6.25%, 8/1/22 /(3)/ $ 2,652,325
Aaa AAA 2,500 Jefferson County, KY
Health Facilities (Jewish
Hosp.) (AMBAC), 6.50%, 5/1/15 2,726,850
Aaa AAA 1,750 Jefferson County, KY
Health Facilities (Jewish
Hosp.) (AMBAC), 6.55%, 5/1/22 1,912,418
Aaa AAA 2,000 Jefferson County, KY
Health Facilities
Authority (University
Medical Center) (MBIA),
5.25%, 7/1/22 1,937,820
Aaa AAA 4,000 Kentucky Development
Finance Authority (Saint
Luke's Hospital) (MBIA),
7.00%, 10/1/21 /(3)/ 4,467,239
- ---------------------------------------------------------------------------
$ 13,696,652
- ---------------------------------------------------------------------------
Insured-Transportation -- 5.4%
- ---------------------------------------------------------------------------
Aaa AAA $3,550 Kenton County, KY Airport,
6.30%, 3/1/15 $ 3,843,336
Aaa AAA 1,000 Kenton County, KY Airport
(FSA), (AMT), 6.30%, 3/1/15 1,055,320
Aaa AAA 1,195 Kenton County, KY Airport
Revenue Board (MBIA),
(AMT), 6.45%, 3/1/15 /(4)/ 1,285,366
Aaa AAA 1,000 Kentucky Economic
Development Authority,
State Turnpike
Revitalization (FGIC),
0.00%, 7/1/10 530,130
- ---------------------------------------------------------------------------
$ 6,714,152
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
57
<PAGE>
Kentucky Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Water and Sewer -- 9.4%
- ---------------------------------------------------------------------------
Aaa AAA $2,000 Kenton County, KY Water
District Waterworks
(FGIC),
6.00%, 2/1/17 $ 2,117,000
Aaa AAA 800 Kenton County, KY Water
District Waterworks
(FGIC),
6.375%, 2/1/17 872,448
Aaa AAA 500 Lexington-Fayette County,
KY Government Sewer System
(MBIA), 6.375%, 7/1/12 543,820
Aaa AAA 3,415 Louisville and Jefferson
County, KY Metropolitan
Sewer District (MBIA),
6.25%, 5/15/26 3,697,966
Aaa AAA 1,000 Louisville and Jefferson
County, KY Sewer District
(AMBAC),
6.75%, 5/15/19 1,146,660
Aaa AAA 2,000 Louisville and Jefferson
County, KY Sewer District
(AMBAC),
6.75%, 5/15/25 2,293,320
Aaa AAA 1,000 Louisville and Jefferson
County, KY Sewer District
(FGIC),
5.20%, 5/15/26 959,640
- ---------------------------------------------------------------------------
$ 11,630,854
- ---------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 15.7%
- ---------------------------------------------------------------------------
A1 A $1,300 Boone County, KY School
District, 6.75%, 9/1/11 $ 1,425,138
A1 A+ 1,200 Fayette County, KY School
District Finance
Corporation,
5.375%, 1/1/15 1,200,408
A1 A+ 2,315 Fayette County, KY School
District Finance
Corporation,
5.375%, 1/1/17 2,296,943
A1 A+ 4,990 Jefferson County, KY
Capital Projects
Corporation, 0.00%, 8/15/15 1,844,005
NR A+ 1,740 Kenton County, KY Building
Revenue, 5.375%, 3/1/17 1,720,321
A A- 1,000 Louisville, KY Public
Property Corporation,
6.80%, 12/1/22 1,103,980
Aa NR 2,000 Mount Sterling, KY Lease,
6.15%, 3/1/13 2,058,020
Aa NR 4,500 Mount Sterling, KY Lease,
6.20%, 3/1/18 4,624,784
A NR 2,000 Owensboro County, KY
Airport Lease, 5.875%,
6/1/15 2,034,700
A1 NR $1,045 Pike County, KY School
District Finance Corp.,
5.125%, 9/1/17 $ 1,011,226
- ---------------------------------------------------------------------------
$ 19,319,525
- ---------------------------------------------------------------------------
Nursing Homes -- 0.7%
- ---------------------------------------------------------------------------
NR NR $ 800 Jefferson County, KY
Health Facilities, Beverly
Enterprises, 9.75%, 8/1/07 $ 870,888
- ---------------------------------------------------------------------------
$ 870,888
- ---------------------------------------------------------------------------
Solid Waste -- 1.0%
- ---------------------------------------------------------------------------
NR NR $1,200 Morgantown, KY Solid Waste
Revenue, 7.45%, 5/1/22 $ 1,241,928
- ---------------------------------------------------------------------------
$ 1,241,928
- ---------------------------------------------------------------------------
Transportation -- 7.8%
- ---------------------------------------------------------------------------
NR BBB $3,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 3,207,750
Baa3 BB+ 500 Kenton County, KY Airport
(Delta Airlines), (AMT),
7.50%, 2/1/20 551,285
Baa3 BB+ 3,400 Kenton County, KY Airport
(Delta Airlines), (AMT),
6.125%, 2/1/22 3,452,291
Baa3 BB+ 1,500 Kenton County, KY Airport
(Delta Airlines), (AMT),
7.125%, 2/1/21 1,631,925
Baa3 BB+ 250 Kenton County, KY Airport
(Delta Airlines), (AMT),
7.50%, 2/1/12 275,643
Baa3 BBB- 500 Puerto Rico Port Authority
(American Airlines),
(AMT), 6.30%, 6/1/23 525,895
- ---------------------------------------------------------------------------
$ 9,644,789
- ---------------------------------------------------------------------------
Water and Sewer -- 1.9%
- ---------------------------------------------------------------------------
NR A $1,500 Campbell County, KY Water
District, 6.60%, 12/1/11 $ 1,639,440
A NR 650 Harden County, KY Water
District, 6.50%, 9/1/12 701,220
- ---------------------------------------------------------------------------
$ 2,340,660
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
58
<PAGE>
Kentucky Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------
<S> <C>
Total Tax-Exempt Investments -- 100.0%
(identified cost $115,387,827) $123,399,257
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Kentucky
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 August 31, 1997, 25.7% 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 by financial institution ranged from 2.2% to 12.7% of total
investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
/(3)/ Security has been segregated to cover when-issued securities.
/(4)/ When-issued security.
See notes to financial statements
59
<PAGE>
Louisiana Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 0.8%
- --------------------------------------------------------------------------
Aaa NR $ 150 Louisiana Public Facilities
Authority, Guaranteed
Student Loan Revenue Bonds
(AMT), 6.75%, 9/1/06 $ 158,285
A2 NR 100 Louisiana Public Facilities
Authority, Student Loan
Revenue Bonds, (AMT),
7.00%, 9/1/06 106,382
- --------------------------------------------------------------------------
$ 264,667
- --------------------------------------------------------------------------
Electric Utilities -- 3.1%
- --------------------------------------------------------------------------
Ba1 BB+ $ 150 Pointe Coupe Parish, LA
(Gulf States Utilities
Company), 6.70%, 3/1/13 $ 158,328
Baa1 BBB+ 2,500 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 839,000
Baa1 BBB+ 175 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 58,730
- --------------------------------------------------------------------------
$ 1,056,058
- --------------------------------------------------------------------------
Hospitals -- 8.5%
- --------------------------------------------------------------------------
Baa1 NR $1,000 Lafourche Parish, LA
Hospital Service District,
6.00%, 10/1/23/(1)/ $ 1,014,320
NR BBB 750 Louisiana PFA, General
Health Systems Project,
6.80%, 11/1/16 808,080
NR A- 750 Saint Tammany Parish, LA
Hospital Service District,
6.50%, 7/1/17 788,280
NR A- 250 Saint Tammany Parish, LA
Hospital Service District,
6.50%, 7/1/22 260,598
- --------------------------------------------------------------------------
$ 2,871,278
- --------------------------------------------------------------------------
Housing -- 29.3%
- --------------------------------------------------------------------------
Aaa NR $ 680 East Baton Rouge Mortgage
Finance Authority, Single
Family (GNMA/FNMA), 7.00%,
4/1/32 $ 713,123
Aaa NR 90 East Baton Rouge Mortgage
Finance Authority, Single
Family, (GNMA), (AMT),
7.88%, 12/1/21 95,375
Aaa NR 230 East Baton Rouge Mortgage
Finance Authority, Single
Family, (GNMA/FNMA), (AMT),
7.10%, 10/1/24 242,818
Aaa NR 500 Louisiana Housing Finance
Agency HFA, 6.38%, 12/1/27 521,785
NR AAA 150 Louisiana Housing Finance
Authority, Multifamily
Housing (Westview Apartment
II), (AMT), (FHA),
7.95%, 1/1/32 159,629
NR AAA 620 Louisiana Housing Finance
Authority, Multifamily,
(FHA), 6.95%, 7/1/16 639,480
Aaa NR 600 Louisiana Housing Finance
Authority, Single Family,
(AMT), (GNMA), 6.30%,
12/1/27 621,744
Aaa NR 1,250 Louisiana Housing Finance
Authority, Single Family,
(AMT), (GNMA), 8.00%, 3/1/25 1,417,913
Aaa NR 650 Louisiana Housing Finance
Authority, Single Family,
(AMT), (GNMA/FNMA), 6.55%,
12/1/26 681,415
NR BBB 1,000 Louisiana Public Facilities
Authority, Multifamily
Housing -(Windsor Housing),
6.25%, 1/1/26 854,920
Aaa NR 1,890 New Orleans Home Mortgage
Authority, Single Family,
(AMT), (GNMA/FNMA), 6.30%,
6/1/28 1,956,603
NR AAA 1,850 Parish of Jefferson, Home
Mortgage Authority, (AMT),
(GNMA/FNMA), 7.35%, 12/1/16 2,029,671
- --------------------------------------------------------------------------
$ 9,934,476
- --------------------------------------------------------------------------
Industrial Development Revenue/Pollution Control Revenue -- 13.5%
- --------------------------------------------------------------------------
A3 A- $1,750 City of Bastrop, LA
(International Paper
Company), (AMT),
6.60%, 3/1/19 $ 1,897,122
A3 A- 750 De Soto Parish, LA
(International Paper
Company), (AMT),
7.70%, 11/1/18 876,435
Aa3 NR 150 De Soto Parish, LA
(Southwestern Electric
Power Company),
7.60%, 1/1/19 170,693
Baa3 BBB- 900 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 956,421
Aa3 NR 500 South Louisiana Port
Commission (Cargill, Inc.),
5.85%, 4/1/17 512,280
Baa1 BBB+ 150 South Louisiana Port
Commission (GATX Terminals
Corporation), 7.00%, 3/1/23 162,141
- --------------------------------------------------------------------------
$ 4,575,092
- --------------------------------------------------------------------------
</TABLE>
See notes to financial statements
60
<PAGE>
Louisiana Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 4.9%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Louisiana Public Facilities
Authority (Tulane
University), (AMBAC),
6.05%, 10/1/25 $ 529,390
Aaa AAA 1,100 Louisiana State University
(FGIC), 5.75%, 7/1/14 1,129,018
- ---------------------------------------------------------------------------
$ 1,658,408
- ---------------------------------------------------------------------------
Insured-General Obligations -- 7.7%
- ---------------------------------------------------------------------------
Aaa AAA $ 250 Commonwealth of Puerto Rico
"RIBS" (AMBAC), Variable
Rate, 7/1/15/(2)/ $ 268,438
Aaa AAA 3,000 New Orleans, LA (AMBAC),
0.00%, 9/1/15 1,125,450
Aaa AAA 2,000 New Orleans, LA (AMBAC),
0.00%, 9/1/16 709,220
Aaa AAA 1,500 New Orleans, LA (AMBAC),
0.00%, 9/1/17 498,795
- ---------------------------------------------------------------------------
$ 2,601,903
- ---------------------------------------------------------------------------
Insured-Hospitals -- 4.9%
- ---------------------------------------------------------------------------
Aaa AAA $ 100 Louisiana Public Facilities
Authority Hospital (MBIA),
7.65%, Variable Rate,
11/28/14/(2)/ $ 111,125
Aaa AAA 1,500 Ouachita Parish, Glenwood
Medical Center (FSA),
5.75%, 5/15/21 1,535,205
- ---------------------------------------------------------------------------
$ 1,646,330
- ---------------------------------------------------------------------------
Insured-Housing -- 0.2%
- ---------------------------------------------------------------------------
Aaa AAA $ 505 East Baton Rouge Mortgage
Finance Authority, Single
Family (MBIA) (GNMA/FNMA),
0.00%, 10/1/15 $ 76,962
- ---------------------------------------------------------------------------
$ 76,962
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 6.2%
- ---------------------------------------------------------------------------
Aaa AAA $2,000 Orleans Levee District
(FSA),
5.95%, 11/1/14 $ 2,107,219
- ---------------------------------------------------------------------------
$ 2,107,219
- ---------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 5.0%
- ---------------------------------------------------------------------------
Aa2 AA $1,650 Saint Bernard Parish (Mobil
Oil), 5.90%, 11/1/26 $ 1,686,828
- ---------------------------------------------------------------------------
$ 1,686,828
- ---------------------------------------------------------------------------
Life Care -- 14.3%
- ---------------------------------------------------------------------------
NR NR $ 500 Louisiana Housing Finance
Agency (HCC Assisted Living
Group 1) (AMT), 9.00%,
3/1/25 $ 543,570
NR AAA 500 Louisiana Housing Finance
Agency (Saint Dominic
Assisted Care Facility)
(GNMA), 6.85%, 9/1/25 546,930
NR AAA 1,995 Louisiana Housing Finance
Agency (Saint Joseph's
Manor Retirement Center)
(GNMA), 7.80%, 12/1/35 2,225,262
NR BBB 1,150 Louisiana Public Facilities
Authority (Glen Retirement
System),
6.70%, 12/1/25 1,190,802
NR NR 300 Saint Tammany, LA, Public
Finance, Christwood
Project,
9.00%, 11/15/25 327,348
- ---------------------------------------------------------------------------
$ 4,833,912
- ---------------------------------------------------------------------------
Transportation -- 1.6%
- ---------------------------------------------------------------------------
A A- $ 500 Mississippi River Bridge
Authority,
Bridge Revenue,
6.75%, 11/1/12/(1)/ $ 548,590
- ---------------------------------------------------------------------------
$ 548,590
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $32,155,616) $33,861,723
- ---------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered
a tax preference item for purposes of the Federal Alternative Minimum Tax.
See notes to financial statements
61
<PAGE>
Louisiana Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
The Portfolio invests primarily in debt securities issued by Louisiana
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 August 31, 1997, 23.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 0.6% to 10.8% of total investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
See notes to financial statements
62
<PAGE>
Maryland Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cogeneration -- 1.2%
- -------------------------------------------------------------------------
NR NR $1,250 Maryland Energy, AES
Warrior Run Project,
(AMT), 7.40%, 9/1/19 $ 1,347,538
- -------------------------------------------------------------------------
$ 1,347,538
- -------------------------------------------------------------------------
Education -- 1.0%
- -------------------------------------------------------------------------
Aa3 AA+ $1,000 University of Maryland
Auxiliary Facilities and
Tuition, 6.30%, 2/1/10 $ 1,078,600
- -------------------------------------------------------------------------
$ 1,078,600
- -------------------------------------------------------------------------
Electric Utilities -- 6.7%
- -------------------------------------------------------------------------
A2 A $1,500 Calvert, MD Pollution
Control Revenue (Baltimore
Gas and Electric Company),
5.55%, 7/15/14 $ 1,516,440
NR BBB 2,500 Guam Power Authority,
5.25%, 10/1/13 2,423,325
NR BBB 750 Guam Power Authority,
6.63%, 10/1/14 809,145
A1 A 2,225 Prince George's County, MD
Pollution Control Revenue
(Potomac Electric), 6.38%,
1/15/23 2,363,751
- -------------------------------------------------------------------------
$ 7,112,661
- -------------------------------------------------------------------------
Escrowed/Prerefunded -- 6.0%
- -------------------------------------------------------------------------
Aaa NR $1,125 Baltimore, MD Single
Family Mortgage (Inner
Harbor), 8.00%, 12/1/10 $ 1,438,944
NR AAA 1,000 Commonwealth of Puerto
Rico Public Improvement,
6.80%, 7/1/21 1,121,470
Aaa AAA 500 Maryland Health and Higher
Educational (University of
Maryland) (FGIC), 6.50%,
7/1/21 538,235
Aaa AAA 1,500 Puerto Rico Public
Buildings Authority,
6.88%, 7/1/21 1,687,080
NR AAA 1,000 University of Maryland
System Auxiliary Facility
and Tuition, 6.50%, 4/1/11 1,074,210
NR AAA 175 University of Maryland
System Auxiliary Facility
and Tuition, 6.50%, 4/1/12 194,262
Aa NR 310 Worcester, MD Sanitary
District, 6.55%, 8/15/17 343,892
- -------------------------------------------------------------------------
$ 6,398,093
- -------------------------------------------------------------------------
General Obligations -- 3.5%
- -------------------------------------------------------------------------
Baa1 A $2,000 Commonwealth of Puerto
Rico, 5.38%, 7/1/25 $ 1,945,000
Aa1 AA 1,000 Washington, MD Suburban
Sanitary District, 5.63%,
6/1/21 1,010,580
Aa1 AA 500 Washington, MD Suburban
Sanitary District, 6.20%,
6/1/11 541,390
Aa NR 190 Worcester, MD Sanitary
District, 6.55%, 8/15/17 207,524
- -------------------------------------------------------------------------
$ 3,704,494
- -------------------------------------------------------------------------
Hospitals -- 14.2%
- -------------------------------------------------------------------------
NR NR $ 480 Berlin, MD (Atlantic
General), 8.38%, 6/1/22 $ 513,912
A1 A 1,175 Maryland Health and Higher
Educational (Good Samaritan
Hospital), 5.75%, 7/1/19 1,201,661
Baa1 BBB 1,250 Maryland Health and Higher
Educational (Howard County
General Hospital), 5.50%,
7/1/25 1,213,850
Baa1 NR 2,500 Maryland Health and Higher
Educational (Union Hospital
of Cecil), 6.70%, 7/1/22 2,637,550
A NR 4,000 Prince George's County, MD
(Dimensions Health),
5.30%, 7/1/24 3,834,079
Baa3 NR 1,355 Prince George's County, MD
(Greater SouthEast Healthcare
System), 6.38%, 1/1/13 1,383,469
Baa NR 4,250 Prince George's County, MD
(Greater SouthEast Healthcare
System), 6.38%, 1/1/23 4,330,197
- -------------------------------------------------------------------------
$ 15,114,718
- -------------------------------------------------------------------------
Housing -- 10.6%
- -------------------------------------------------------------------------
Aa NR $1,000 Maryland Community
Development Administration
Multifamily, FHA, (AMT),
6.70%, 5/15/36 $ 1,050,840
</TABLE>
See notes to financial statements
63
<PAGE>
Maryland Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- -------------------------------------------------------------------------
Aa NR $ 245 Maryland Community
Development Administration
Single Family, 6.85%,
4/1/11 $ 258,098
Aa NR 3,000 Maryland Community
Development Administration
Single Family, (AMT),
6.75%, 4/1/26 3,188,370
Aa NR 935 Maryland Community
Development Administration
Single Family, (AMT),
6.80%, 4/1/22 991,091
Aa NR 745 Maryland Community
Development Administration
Single Family, (AMT)
6.80%, 4/1/24 789,693
Aa2 NR 2,525 Montgomery County, MD
Single Family Mortgage
Revenue,
6.05%, 7/1/27 2,583,732
NR A 300 Prince George's County, MD
(Antoinette Gardens
Apartments), FHA, 7.00%,
3/1/28 313,665
NR AAA 2,160 Prince George's County,
MD, Housing Authority
(Langely Gardens), 5.88%,
2/20/39 2,153,282
- -------------------------------------------------------------------------
$ 11,328,771
- -------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 11.8%
- -------------------------------------------------------------------------
A1 A $1,350 Allegany, MD Pollution
Control Revenue (Westvaco
Corporation), 6.20%, 1/1/08 $ 1,480,815
NR NR 1,350 Baltimore, MD Pollution
Control Revenue (Bethlehem
Steel Corporation), 7.50%,
6/1/15 1,479,438
Aa3 AA- 2,000 Baltimore, MD Port
Facilities (Consolidated
Coal Sales Company - E.I.
du Pont de Nemours),
6.50%, 12/1/10 2,179,960
Aa3 AA- 2,000 Baltimore, MD Port
Facilities (Consolidated
Coal Sales Company - E.I.
du Pont de Nemours),
6.50%, 10/1/11 2,176,300
NR AA- 1,425 Frederick, MD Economic
Development Authority
(Cargill, Incorporated),
6.30%, 11/1/09 /(1)/ 1,549,089
Baa3 BBB- 2,000 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 2,125,380
Baa3 BBB- 1,500 Puerto Rico Port Authority
(American Airlines),
(AMT), 6.30%, 6/1/23 1,577,685
- -------------------------------------------------------------------------
$ 12,568,667
- -------------------------------------------------------------------------
Insured-Colleges and Universities -- 5.1%
- -------------------------------------------------------------------------
Aaa AAA $5,500 Maryland Health and Higher
Educational (Loyola
College) (MBIA), 5.38%,
10/1/26 $ 5,455,724
- -------------------------------------------------------------------------
$ 5,455,724
- -------------------------------------------------------------------------
Insured-Education -- 3.1%
- -------------------------------------------------------------------------
Aaa AAA $1,200 Morgan State University,
Maryland Academic and
Facilities (MBIA), 6.10%,
7/1/20 $ 1,321,116
Aaa AAA 2,000 Saint Marys College, MD,
(MBIA), 5.25%, 9/1/27 1,944,100
- -------------------------------------------------------------------------
$ 3,265,216
- -------------------------------------------------------------------------
Insured-Electric Utilities -- 2.1%
- -------------------------------------------------------------------------
Aaa AAA $ 250 Commonwealth of Puerto Rico
Electric Power Authority
STRIPES (FSA), Variable
Rate, 7/1/03 /(2)/ $ 279,063
Aaa AAA 2,000 Montgomery County, MD
Pollution Control Revenue
(MBIA), 5.38%, 2/15/24 1,968,040
- -------------------------------------------------------------------------
$ 2,247,103
- -------------------------------------------------------------------------
Insured-Hospitals -- 4.6%
- -------------------------------------------------------------------------
Aaa AAA $1,365 Maryland Health and Higher
Educational (Washington
Community Hospital) (AMBAC),
6.38%, 7/1/22 $ 1,502,428
Aaa AAA 3,150 Puerto Rico Industrial
Medical and Environmental
Pollution Control
Facilities Financing
Authority (MBIA), 6.25%,
7/1/24 3,391,983
- -------------------------------------------------------------------------
$ 4,894,411
- -------------------------------------------------------------------------
</TABLE>
See notes to financial statements
64
<PAGE>
Maryland Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Housing -- 0.5%
- --------------------------------------------------------------------------
Aaa AAA $ 500 Prince George's County, MD
(Keystone Apartments),
FHA, (MBIA), 6.80%, 7/1/25 $ 531,245
- --------------------------------------------------------------------------
$ 531,245
- --------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 6.4%
- --------------------------------------------------------------------------
Aaa AAA $2,000 Baltimore, MD COP (AMBAC),
5.00%, 10/1/17 $ 1,916,740
Aaa AAA 1,000 Maryland Stadium Authority
(AMBAC), 5.60%, 3/1/14 1,024,120
Aaa AAA 1,000 Maryland Stadium Authority
(AMBAC), 5.80%, 3/1/26 1,033,190
Aaa AAA 3,000 Puerto Rico Public
Buildings Authority
(AMBAC), 5.00%, 7/1/27 2,839,860
- --------------------------------------------------------------------------
$ 6,813,910
- --------------------------------------------------------------------------
Insured-Solid Waste -- 5.0%
- --------------------------------------------------------------------------
Aaa AAA $5,000 NE Maryland Solid Waste
Disposal (MBIA), (AMT),
6.30%, 7/1/16 $ 5,303,749
- --------------------------------------------------------------------------
$ 5,303,749
- --------------------------------------------------------------------------
Insured-Transportation -- 5.5%
- --------------------------------------------------------------------------
Aaa AAA $2,000 Baltimore, MD
International Airport
(AMT), (FGIC), 6.25%,
7/1/14 $ 2,132,540
Aaa AAA 3,750 Washington, D.C. Metro Area
Transportation (FGIC),
5.25%, 7/1/14 3,716,663
- --------------------------------------------------------------------------
$ 5,849,203
- --------------------------------------------------------------------------
Insured-Water and Sewer -- 7.1%
- --------------------------------------------------------------------------
Aaa AAA $1,500 Baltimore, MD Sewer
(FGIC), 5.50%, 7/1/26 $ 1,501,095
Aaa AAA 1,000 Baltimore, MD Wastewater
(FGIC), 5.00%, 7/1/22 956,100
Aaa AAA 2,000 Baltimore, MD Wastewater
(MBIA), 5.65%, 7/1/20 2,070,320
Aaa AAA 3,000 Baltimore, MD Water
(FGIC), 5.50%, 7/1/26 3,002,190
- --------------------------------------------------------------------------
$ 7,529,705
- --------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 2.1%
- --------------------------------------------------------------------------
A NR $1,000 Baltimore, MD Revenue
Authority, 5.38%, 7/1/18 $ 986,970
NR BBB 1,250 Puerto Rico (Guaynabo
Municipal Government
Center Lease),
5.63%, 7/1/22 1,234,250
- --------------------------------------------------------------------------
$ 2,221,220
- --------------------------------------------------------------------------
Special Tax Revenue -- 0.8%
- --------------------------------------------------------------------------
NR NR $ 750 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 $ 834,825
- --------------------------------------------------------------------------
$ 834,825
- --------------------------------------------------------------------------
Transportation -- 1.7%
- --------------------------------------------------------------------------
NR BBB $1,700 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 1,817,725
- --------------------------------------------------------------------------
$ 1,817,725
- --------------------------------------------------------------------------
Water and Sewer -- 1.0%
- --------------------------------------------------------------------------
Aa2 AA $1,000 Maryland Water Quality
Financing Administration
Revolving Loan Fund,
6.55%, 9/1/14 $ 1,090,520
- --------------------------------------------------------------------------
$ 1,090,520
- --------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $101,424,067) $ 106,508,098
- --------------------------------------------------------------------------
</TABLE>
AMT- Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
See notes to financial statements
65
<PAGE>
Maryland Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
The Portfolio invests primarily in debt securities issued by Maryland
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 August 31, 1997, 32.4% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 0.3% to 15.2% of total investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
See notes to financial statements
66
<PAGE>
Missouri Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Utilities -- 3.4%
- --------------------------------------------------------------------------------
NR BBB $1,010 Guam Power Authority Revenue
Bonds, 6.30%, 10/1/22 $ 1,044,875
Baa1 BBB+ 1,500 Puerto Rico Electric Power
Authority, 6.38%, 7/1/24 1,634,025
- --------------------------------------------------------------------------------
$ 2,678,900
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 5.1%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Sikeston, Electric System,
(MBIA), 6.25%, 6/1/22 /(1)/ $ 1,093,650
Aaa AAA 575 Missouri Health and Education
Authority (Saint Louis Children's)
(MBIA), 0.00%, 5/15/08 334,748
Aaa AAA 1,000 Saint Louis County, Mortgage
Revenue (GNMA) (AMT),
5.40%, 1/1/16 994,740
Aaa AAA 1,425 Saint Louis, MO, Regional
Convention and Sports Complex,
Prerefunded, 7.90%, 8/15/21 1,675,415
- --------------------------------------------------------------------------------
$ 4,098,553
- --------------------------------------------------------------------------------
Hospitals -- 12.5%
- --------------------------------------------------------------------------------
Aa2 AA $3,250 Missouri Health and Education
Authority (Barnes Jewish
Christian), 5.25%, 5/15/14 $ 3,242,558
Baa NR 2,000 Missouri Health and Education
Authority (Jefferson Memorial
Hospital), 6.00%, 8/15/23 2,024,520
Baa NR 1,900 Missouri Health and Education
Authority (Jefferson Memorial
Hospital), 6.80%, 5/15/25 2,025,533
NR BBB+ 1,500 Missouri Health and Education
Authority (Lake of the Ozarks),
6.50%, 2/15/21 1,571,250
Aa1 AA+ 1,000 Missouri Health and Education
Authority (Sisters of Mercy),
6.25%, 6/1/15 1,054,420
- --------------------------------------------------------------------------------
$ 9,918,281
- --------------------------------------------------------------------------------
Housing -- 3.2%
- --------------------------------------------------------------------------------
NR AAA $ 905 Missouri Housing Development
Authority, Single Family Mortgage
Revenue (AMT), (GNMA),
7.25%, 9/1/26 $ 1,003,699
NR AAA 940 Missouri Housing Development
Authority, Single Family Mortgage
Revenue (GNMA), 6.45%, 9/1/27 982,187
NR AAA 535 Missouri Housing Development
Authority, Single Family Mortgage
Revenue, (AMT), (GNMA),
6.75%, 6/1/24 559,669
- --------------------------------------------------------------------------------
$ 2,545,555
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution Control Revenue -- 13.0%
- --------------------------------------------------------------------------------
NR BB- $1,035 Jefferson County (Kmart
Corporation), 6.40%, 8/1/08 /(2)/ $ 1,064,673
NR NR 1,300 Kansas City, Industrial
Development Authority (Airline
Cargo Facilities), 8.50%, 1/1/17 1,449,110
A3 NR 1,200 Missouri Environmental
Improvement and Energy Resources
Authority (American Cyanamid
Company), 5.80%, 9/1/09 1,295,100
Baa3 BBB- 2,500 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 2,656,725
A1 A+ 3,750 Saint Louis Industrial
Development Authority
(Anheuser-Busch), (AMT),
5.88%, 11/1/26 3,850,162
- --------------------------------------------------------------------------------
$10,315,770
- --------------------------------------------------------------------------------
Insured-Education -- 3.0%
- --------------------------------------------------------------------------------
Aaa AAA $2,500 Missouri Health and Education
(Saint Louis University), (AMBAC),
5.20%, 10/1/26 $ 2,398,650
- --------------------------------------------------------------------------------
$ 2,398,650
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 8.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Sikeston, Electric System
(MBIA), 5.00%, 6/1/22 $ 939,160
Aaa AAA 700 Commonwealth of Puerto Rico
Electric Power Authority STRIPES
(FSA), Variable Rate, 7/1/03 /(3)/ 781,375
</TABLE>
See notes to financial statements
67
<PAGE>
Missouri Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Electric Utilities (continued)
- --------------------------------------------------------------------------------
Aaa AAA $5,000 Missouri Environmental Improvement
and Energy Resources Authority
(Union Electric), (AMT), (AMBAC),
5.45%, 10/1/28 $ 4,861,149
- --------------------------------------------------------------------------------
$ 6,581,684
- --------------------------------------------------------------------------------
Insured-General Obligations -- 1.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Commonwealth of Puerto Rico "RIBS"
(AMBAC), Variable Rate, 7/1/15/(3)/ $ 536,875
AAA AAA 500 Commonwealth of Puerto Rico (FSA),
Variable Rate, 7/1/22/(3)/ 542,500
- --------------------------------------------------------------------------------
$ 1,079,375
- --------------------------------------------------------------------------------
Insured-Hospitals -- 15.3%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Jackson County, Saint Joseph's
Health System (MBIA), 6.50%,
7/1/12 $ 1,092,990
Aaa AAA 800 Jackson County, Saint Joseph's
Health System (MBIA), 6.50%,
7/1/19 874,392
Aaa AAA 1,500 Missouri Health and Education
Authority (AMBAC), 6.35%, 11/15/17 1,633,725
Aaa AAA 9,500 Missouri Health and Education
Authority (Lester Cox Medical
Center), (MBIA), 0.00%, 9/1/20 2,648,410
Aaa AAA 2,900 Missouri Health and Education
Authority (Lester Cox Medical
Center), (MBIA), 5.35%, 6/1/10 3,004,052
Aaa AAA 2,000 Missouri Health and Education
Authority (Saint Luke's Health
System) (MBIA), 5.13%, 11/15/19 1,899,420
Aaa AAA 1,000 Missouri Health and Education
Authority (Sisters of Saint Mary),
(MBIA), 6.25%, 6/1/16 1,059,660
- --------------------------------------------------------------------------------
$12,212,649
- --------------------------------------------------------------------------------
Insured-Housing -- 2.0%
- --------------------------------------------------------------------------------
Aaa AAA $1,500 SCA MFMR Receipts, Springfield,
MO (FSA), 7.10%, 1/1/30 $ 1,635,285
- --------------------------------------------------------------------------------
$ 1,635,285
- --------------------------------------------------------------------------------
Insured-Lease Revenue/Certificates of Participation -- 4.2%
- --------------------------------------------------------------------------------
Aaa AAA $1,750 Kansas City Municipal Assistance
Corporation, Bartle Hall
Convention (AMBAC), 5.00%, 4/15/20 $ 1,648,185
Aaa AAA 500 Kansas City School District
(FGIC), 5.00%, 2/1/14 484,730
Aaa AAA 600 Kansas City School District,
Building Corporation (FGIC),
6.50%, 2/1/08 646,554
Aaa AAA 500 Saint Charles County, Public
Facilities Authority (FGIC),
6.38%, 3/15/07 543,925
- --------------------------------------------------------------------------------
$ 3,323,394
- --------------------------------------------------------------------------------
Insured-Transportation -- 1.2%
- --------------------------------------------------------------------------------
Aaa AAA $ 910 Saint Louis, MO, Airport Revenue
(Lambert International Airport)
(FGIC), 6.00%, 7/1/14/(4)/ $ 977,668
- --------------------------------------------------------------------------------
$ 977,668
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 1.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 City of Saint Louis (FGIC),
6.00%, 7/1/14 $ 788,228
- --------------------------------------------------------------------------------
$ 788,228
- --------------------------------------------------------------------------------
Lease Revenue/Certificates of Participation -- 7.6%
- --------------------------------------------------------------------------------
A BBB+ $3,000 Saint Louis County, Regional
Convention and Sports Complex
Authority, 5.50%, 8/15/13 $ 2,977,890
A BBB+ 1,000 Saint Louis County, Regional
Convention and Sports Complex
Authority, 5.75%, 8/15/21 1,003,140
NR NR 75 Saint Louis, MO, Regional
Convention and Sports Complex,
7.90%, 8/15/21 83,598
A1 A+ 2,000 State of Missouri, Regional
Convention and Sports Complex
Authority, 5.50%, 8/15/21 1,989,400
- --------------------------------------------------------------------------------
$ 6,054,028
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
68
<PAGE>
Missouri Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life Care -- 4.3%
- --------------------------------------------------------------------------------
Baa1 NR $ 300 Cass County, Fox Springs Living
Center, 7.38%, 10/1/22 $ 326,205
NR NR 950 Kansas City, MO Industrial
Development Authority (Kingswood
United Methodist Manor), 9.00%,
11/15/13/(2)/ 1,047,480
NR NR 2,000 Missouri Health and Education
Authority (Lutheran Hospital),
6.38%, 2/1/27 2,076,380
- --------------------------------------------------------------------------------
$ 3,450,065
- --------------------------------------------------------------------------------
Nursing Homes -- 3.4%
- --------------------------------------------------------------------------------
NR NR $1,000 Kansas City, Industrial
Development Authority (Beverly
Enterprises), 8.00%, 12/1/02 $ 1,060,170
NR NR 500 Missouri Health and Education
Authority (Bethesda Health Group
of Saint Louis Inc.), 6.63%,
8/15/05 526,150
NR NR 1,000 Missouri Health and Education
Authority (Bethesda Health Group
of Saint Louis, Inc.), 7.50%,
8/15/12 1,115,730
- --------------------------------------------------------------------------------
$ 2,702,050
- --------------------------------------------------------------------------------
Pooled Loans -- 3.4%
- --------------------------------------------------------------------------------
A NR $2,750 Missouri Higher Education Loan
Authority, Student Loan, (AMT),
5.45%, 2/15/09 $ 2,733,748
- --------------------------------------------------------------------------------
$ 2,733,748
- --------------------------------------------------------------------------------
Special Tax Revenue -- 2.3%
- --------------------------------------------------------------------------------
Baa1 A $1,000 Puerto Rico, Highway and
Transportation Authority,
6.63%, 7/1/12 $ 1,092,530
NR NR 650 Virgin Islands Public Finance
Authority, 7.25%, 10/1/18 723,515
- --------------------------------------------------------------------------------
$ 1,816,045
- --------------------------------------------------------------------------------
Transportation -- 1.3%
- --------------------------------------------------------------------------------
NR NR $1,000 Lake of The Ozarks Community
Bridge Corporation, 6.40%,
12/1/25/(2)/ $ 1,007,050
- --------------------------------------------------------------------------------
$ 1,007,050
- --------------------------------------------------------------------------------
Water and Sewer -- 4.1%
- --------------------------------------------------------------------------------
Aa1 NR $1,000 Missouri Environmental
Improvement and Energy Resources
Authority, 0.00%, 1/1/14 $ 414,060
Aa1 NR 500 Missouri Environmental
Improvement and Energy Resources
Authority, 6.55%, 7/1/14 542,580
Aa1 NR 800 Missouri Environmental
Improvement and Energy Resources
Authority, 6.88%, 6/1/14 875,560
Aa1 NR 1,250 Missouri Environmental
Improvement and Energy Resources
Authority, 7.20%, 7/1/16/(2)/ 1,430,063
- --------------------------------------------------------------------------------
$ 3,262,263
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $73,588,023) $79,579,241
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Missouri
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 August 31, 1997, 38.2% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 3.7% to 16.3% of total investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been segregated to cover when-issued securities.
/(3)/ Security has been issued as an inverse floater bond.
/(4)/ When-issued security.
See notes to financial statements
69
<PAGE>
North Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 3.8%
- ---------------------------------------------------------------------------
Aa1 AA+ $1,000 North Carolina Educational
Facilities Finance Agency
(Duke University), 6.75%,
10/1/21 $ 1,093,120
Aa3 AA 1,935 University of North
Carolina at Chapel Hill,
5.00%, 2/15/29 1,793,668
Aa3 AA 3,530 University of North
Carolina at Chapel Hill,
5.25%, 2/15/26 3,413,545
- ---------------------------------------------------------------------------
$ 6,300,333
- ---------------------------------------------------------------------------
Electric Utilities -- 7.8%
- ---------------------------------------------------------------------------
A2 A $1,015 Chatham County Industrial
Facilities and Pollution
(Carolina Power and
Light), 6.30%, 6/15/14 $ 1,082,609
A3 A- 550 North Carolina Municipal
Power Authority (Catawba
Electric), 7.00%, 1/1/16 565,142
Baa1 BBB 5,000 North Carolina Municipal
Power Authority (Eastern
Power), 6.13%, 1/1/09 5,295,249
Baa1 BBB+ 2,000 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 671,200
Baa1 BBB+ 2,000 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 671,200
Baa1 BBB+ 4,250 Puerto Rico Electric Power
Authority, 5.25%, 7/1/21 4,076,813
Baa1 BBB+ 365 Puerto Rico Electric Power
Authority, 7.13%, 7/1/14 389,959
NR NR 240 Virgin Islands Water and
Sewer Authority, 7.40%,
7/1/11 258,854
- ---------------------------------------------------------------------------
$ 13,011,026
- ---------------------------------------------------------------------------
Escrowed / Prerefunded -- 0.5%
- ---------------------------------------------------------------------------
Baa1 AAA $ 635 Puerto Rico Electric Power
Authority, Prerefunded to
7/1/99, 7.13%, 7/1/14 $ 679,888
NR AAA 150 Puerto Rico General
Obligations, Prerefunded
to 7/1/00, 7.30%, 7/1/20 165,509
- ---------------------------------------------------------------------------
$ 845,397
- ---------------------------------------------------------------------------
General Obligations -- 2.2%
- ---------------------------------------------------------------------------
A A- $ 175 Eden, Water and Sewer
Bonds, (AMT), 6.75%, 6/1/08 $ 190,570
Aaa AAA 3,550 North Carolina Capital
Improvements, 4.75%, 2/1/12 3,427,596
- ---------------------------------------------------------------------------
$ 3,618,166
- ---------------------------------------------------------------------------
Hospitals -- 16.2%
- ---------------------------------------------------------------------------
Aa3 AA $2,090 Charlotte-Mecklenberg
Hospital, 0.00%, 1/1/06 $ 1,406,089
Aa3 AA 2,000 Charlotte-Mecklenberg
Hospital, 5.88%, 1/15/26 2,066,560
Aa3 AA 2,000 North Carolina Medical
Care Commission, 5.25%,
6/1/21 1,952,100
Aa3 AA 1,000 North Carolina Medical
Care Commission (Carolina
Medicorp), 6.00%, 5/1/21 1,017,990
Aa3 AA 3,500 North Carolina Medical
Care Commission (Duke
Univ. Hosp.), 0.00%, 6/1/09 1,902,810
NR NR 5,500 North Carolina Medical
Care Commission (Mercy
Hospital), 6.50%, 8/1/08 /(1)/ 6,022,554
Aa3 AA 2,000 North Carolina Medical
Care Commission (North
Carolina Baptist
Hospital), 6.00%, 6/1/22 2,046,540
Aa3 AA 1,700 North Carolina Medical
Care Commission
(Presbyterian Health
Services), 6.00%, 10/1/24 1,771,502
A1 A+ 2,000 North Carolina Medical
Care Commission (Rex
Hospital),
6.13%, 6/1/10 2,119,260
NR BBB+ 2,500 North Carolina Medical
Care Commission
(Roanoke-Chowan Hospital),
7.75%, 10/1/19 2,648,850
Aa3 AA- 4,165 Pitt County Memorial
Hospital, 5.25%, 12/1/21 4,020,683
- ---------------------------------------------------------------------------
$ 26,974,938
- ---------------------------------------------------------------------------
Housing -- 12.9%
- ---------------------------------------------------------------------------
NR AAA $1,900 Charlotte Housing
Authority, Double Oaks,
FHA, (FNMA), 7.35%, 5/15/26 $ 2,084,357
Aa2 AA 2,250 North Carolina Housing
Finance Agency, 6.70%,
1/1/26 2,412,383
</TABLE>
See notes to financial statements
70
<PAGE>
North Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- --------------------------------------------------------------------------------
Aa2 AA $1,500 North Carolina Housing
Finance Agency, Single
Family Mortgage Revenue,
(AMT), 6.30%, 3/1/26 $ 1,557,180
Aa2 AA 4,395 North Carolina Housing
Finance Agency,
Multifamily Mortgage
Revenue, 6.85%, 7/1/13 4,678,434
Aa2 AA 1,970 North Carolina Housing
Finance Agency,
Multifamily Mortgage
Revenue, (AMT), 6.45%,
9/1/27 2,063,358
Aa AA 1,250 North Carolina Housing
Finance Agency, Single
Family Mortgage Revenue,
(AMT), 6.20%, 9/1/27 1,289,825
Aa AA 2,080 North Carolina Housing
Finance Agency, Single
Family Mortgage Revenue,
(AMT), 6.60%, 9/1/26 2,189,491
Aa2 AA 3,880 North Carolina Housing
Finance Agency, Single
Family Mortgage Revenue,
(AMT), 6.70%, 9/1/26 4,101,160
Aa AA 850 North Carolina Housing
Finance Agency, Single
Family Mortgage Revenue,
(AMT), 7.05%, 9/1/20 900,227
Aaa AAA 125 Puerto Rico Housing
Finance Corp., Single
Family Mortgage Revenue,
(GNMA), 6.85%, 10/15/23 131,665
- --------------------------------------------------------------------------------
$ 21,408,080
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution
Control Revenue -- 11.8%
- --------------------------------------------------------------------------------
Baa1 NR $1,350 Haywood County Industrial
Development Authority
(Champion International
Corporation),
6.25%, 9/1/25 $ 1,412,316
Baa1 BBB 2,750 Haywood County Industrial
Development Authority
(Champion International
Corporation), (AMT),
5.50%, 10/1/18/(2)/ 2,712,710
Baa1 BBB 1,500 Haywood County Industrial
Development Authority
(Champion International
Corporation), (AMT),
5.75%, 12/1/25 1,507,005
A2 A 4,250 Martin County Industrial
Development Authority
(Weyerhaeuser Company),
(AMT), 6.80%, 5/1/24 4,677,040
Baa2 BBB 2,500 New Hanover County
(Occidental Petroleum
Corporation), 6.70%, 7/1/19 2,657,900
Baa3 BBB- 5,355 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26/(1)/ 5,690,704
NR A1+ 850 Robeson County, Industrial
Facilities and Pollution
Control Financing
Authority (Campbell Soup
Company), 6.40%, 12/1/06 949,790
- --------------------------------------------------------------------------------
$ 19,607,465
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 7.4%
- --------------------------------------------------------------------------------
Aaa AAA $2,400 Fayetteville, NC, Public
Works Commission Revenue
(FGIC), 4.75%, 3/1/14 $ 2,235,960
Aaa AAA 1,000 Guam Power Authority
Revenue, Series A (AMBAC),
5.25%, 10/1/13 1,007,160
Aaa AAA 1,500 North Carolina Eastern
Municipal Power Authority
(FSA), Variable Rate,
1/1/19 1,516,875
Aaa AAA 2,000 North Carolina Municipal
Power Agency, (Catawba
Electric Revenue, Series A)
(MBIA), 5.13%, 1/1/17/(3)/ 1,918,140
Aaa AAA 4,000 North Carolina Municipal
Power Authority (Catawba
Electric) (MBIA), Variable
Rate, 1/1/12/(2)/ 4,035,000
Aaa AAA 1,400 Puerto Rico Electric Power
Authority, (FSA) Variable
Rate, 7/1/02 1,531,250
- --------------------------------------------------------------------------------
$ 12,244,385
- --------------------------------------------------------------------------------
Insured-General Obligations -- 2.9%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Commonwealth of Puerto
Rico "RIBS" (AMBAC),
Variable Rate, 7/1/15 /(4)/ $ 1,073,750
aa AAA 3,500 Puerto Rico (FSA),
Variable Rate, 7/1/22 /(4)/ 3,797,500
- --------------------------------------------------------------------------------
$ 4,871,250
- --------------------------------------------------------------------------------
Insured-Hospitals -- 11.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Cumberland County
Hospital, (MBIA), 0.00%,
10/1/09 $ 268,495
</TABLE>
See notes to financial statements
71
<PAGE>
North Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Hospitals (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 935 North Carolina Medical
Care Commission (Memorial
Mission Hospital) (FSA),
0.00%, 10/1/06 $ 598,989
Aaa AAA 3,750 North Carolina Medical
Care Commission (Moore
Regional Hospital) (FGIC),
5.00%, 10/1/18 3,526,388
Aaa AAA 5,000 North Carolina Medical
Care Commission (Saint
Joseph's Medical Center)
(AMBAC), 5.10%, 10/1/14 4,904,750
Aaa AAA 1,500 North Carolina Medical
Care Commission (Wilson
Memorial Hospital)
(AMBAC), 0.00%, 11/1/15 557,640
Aaa AAA 9,500 North Carolina Medical
Care Commission Hospital
Revenue, (Wake County
Hospital) (MBIA), 5.38%,
10/1/26 9,274,279
- --------------------------------------------------------------------------------
$ 19,130,541
- --------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 4.6%
- --------------------------------------------------------------------------------
Aaa AAA $3,900 Charlotte, Convention
Facility (AMBAC), 5.25%,
12/1/13 $ 3,899,688
Aaa AAA 1,575 Franklin, (FGIC), 6.63%,
6/1/14 1,742,612
Aaa AAA 1,000 Mooresville School
District (AMBAC), 6.35%,
10/1/14 1,087,750
Aaa AAA 1,000 Puerto Rico Public
Buildings Authority
(AMBAC), 5.00%, 7/1/27 946,620
- --------------------------------------------------------------------------------
$ 7,676,670
- --------------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 7.8%
- --------------------------------------------------------------------------------
A1 A $2,065 Buncombe County,
6.63%, 12/1/10 $ 2,206,473
A3 A- 6,000 Columbus County, NC,
Industrial Facility and
Pollution Control
Financing (International
Paper Co., Project-Series
A), (AMT),
6.15%, 4/1/21 6,243,419
NR AA 825 Durham County, 6.10%,
7/15/07 885,308
Aa3 NR 985 Durham County, 6.75%,
12/1/11 1,095,714
A1 AA 2,400 Greensboro, Greensboro
Coliseum Arena, 6.75%,
12/1/09 2,592,096
- --------------------------------------------------------------------------------
$ 13,023,010
- --------------------------------------------------------------------------------
Special Tax Revenue -- 8.3%
- --------------------------------------------------------------------------------
Baa1 A $3,900 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/36 $ 3,617,601
Baa1 A 4,000 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.25%, 7/1/20 3,825,480
Baa1 A 1,825 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.50%, 7/1/36 1,810,364
Baa1 BBB+ 200 Puerto Rico Finance
Authority, 7.90%, 7/1/07 210,568
Baa1 A 1,490 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/15 1,503,395
NR NR 2,550 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 2,838,405
- --------------------------------------------------------------------------------
$ 13,805,813
- --------------------------------------------------------------------------------
Transportation -- 1.1%
- --------------------------------------------------------------------------------
NR BBB $1,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 1,069,250
Baa3 BBB- 750 Puerto Rico Port Authority
(American Airlines),
(AMT), 6.30%, 6/1/23 788,843
- --------------------------------------------------------------------------------
$ 1,858,093
- --------------------------------------------------------------------------------
Water and Sewer -- 1.2%
- --------------------------------------------------------------------------------
Aa AA $2,000 Orange County, Water and
Sewer, 5.20%, 7/1/16 $ 1,978,540
- --------------------------------------------------------------------------------
$ 1,978,540
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $153,838,803) $ 166,353,707
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
See notes to financial statements
72
<PAGE>
North Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
The Portfolio invests primarily in debt securities issued by North Carolina
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 August 31, 1997, 26.4% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 4.5% to 9.3% of total investments.
/(1)/ Security has been segregated to cover when-issued securities.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(3)/ When-issued security.
/(4)/ Security has been issued as an inverse floater bond.
See notes to financial statements
73
<PAGE>
Oregon Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cogeneration -- 1.9%
- ----------------------------------------------------------------------------
NR NR $2,000 Western Generation Agency
(Wauna Cogeneration), (AMT),
7.40%, 1/1/16 $ 2,142,380
- ----------------------------------------------------------------------------
$ 2,142,380
- ----------------------------------------------------------------------------
Education -- 0.9%
- ----------------------------------------------------------------------------
A2 NR $1,000 City of Salem, Educational
Facilities (Willamette
University), 6.10%, 4/1/14 $ 1,047,620
- ----------------------------------------------------------------------------
$ 1,047,620
- ----------------------------------------------------------------------------
Electric Utilities -- 5.2%
- ----------------------------------------------------------------------------
Aa1 AA- $4,000 City of Eugene, Trojan Nuclear
Power, 5.90%, 9/1/09/(1)/ $ 4,004,200
A A+ 500 Commonwealth of Puerto Rico,
Telephone Authority, Variable
Rate, 1/1/20/(2)/ 543,125
Aa1 AA- 1,500 Northern Wasco County, McNary
Dam Fishway Hydroelectric,
Bonneville Power Administration,
5.20%, 12/1/24 1,451,085
- ----------------------------------------------------------------------------
$ 5,998,410
- ----------------------------------------------------------------------------
Escrowed/Prerefunded -- 3.2%
- ----------------------------------------------------------------------------
A1 AAA $2,000 City of Medford, Rogue Valley
Memorial Hospital,
6.25%, 12/1/07 $ 2,240,280
NR A+ 1,250 State of Oregon Health,
Housing, Educational and
Cultural Facilities Authority
(Reed College), 6.75%, 7/1/21 1,374,950
- ----------------------------------------------------------------------------
$ 3,615,230
- ----------------------------------------------------------------------------
General Obligations -- 13.6%
- ----------------------------------------------------------------------------
Aa NR $2,000 Lane County, City of
Eugene, School District,
5.38%, 7/1/13 $ 2,011,280
Aa2 AA 2,000 Oregon State Veterans
Welfare, Series 76A,
5.90%, 10/1/17 2,071,240
Aa2 AA 1,000 State of Oregon, Board of
Higher Education, 6.00%,
10/15/18 1,052,520
Aa2 AA 1,250 State of Oregon, Elderly
and Disabled Housing,
6.38%, 8/1/24 1,348,275
Aa2 AA 5,110 State of Oregon, Elderly
and Disabled Housing,
(AMT), 5.65%, 8/1/26 5,174,795
Aa2 AA 1,225 State of Oregon, Veterans'
Welfare Bonds, 5.85%,
10/1/15 1,266,417
Aa2 AA 1,500 State of Oregon, Veterans'
Welfare Bonds, 5.88%,
10/1/18 1,551,240
Aa AA+ 1,000 Tri-County Metropolitan
Transportation District,
Light Rail Extension,
6.00%, 7/1/12 1,048,470
- ----------------------------------------------------------------------------
$ 15,524,237
- ----------------------------------------------------------------------------
Hospitals -- 1.8%
- ----------------------------------------------------------------------------
NR A $1,000 Benton County, Good
Samaritan Hospital
Corvallis, 6.25%, 10/1/09 $ 1,043,590
Aa3 AA 1,000 Clackamas County, Kaiser
Permanente, 6.25%, 4/1/21 1,046,850
- ----------------------------------------------------------------------------
$ 2,090,440
- ----------------------------------------------------------------------------
Housing -- 29.9%
- ----------------------------------------------------------------------------
Aaa NR $2,875 City of Portland Housing
Authority, Multifamily
Mortgage Revenue, Cherry
Blossom Apartments, (AMT),
6.20%, 12/20/36 $ 2,972,319
NR A 1,750 City of Portland Housing
Authority, Multifamily
Mortgage Revenue,
Riverwood, 6.00%, 1/1/19 1,771,560
NR NR 2,105 Hood River County, OR,
Health Facility Authority
Elderly Housing Revenue
(Down Manor Project),
6.50%, 1/1/17 2,153,773
Aa2 NR 1,500 Oregon Housing and
Commerce Service
Manufacturer,
6.20%, 7/1/28 1,542,780
Aa2 NR 4,700 Oregon State Housing and
Community Services
Department, Mortgage
Revenue, Series A, (AMT),
6.20%, 7/1/27 4,887,577
NR A 1,000 Portland, OR Housing
Authority, 6.00%, 1/1/27 1,011,300
</TABLE>
See notes to financial statements
74
<PAGE>
Oregon Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing (continued)
- ---------------------------------------------------------------------------
Aa3 NR $5,810 Portland, OR, Housing
Authority, Multifamily
Revenue Housing (Berry
Ridge Project), (AMT),
6.30%, 5/1/29 $ 6,026,538
Aa2 NR 2,000 State of Oregon Housing
and Community Services
Department, Single Family
Mortgage Revenue, (AMT),
6.20%, 7/1/27 2,074,920
Aa2 NR 3,500 State of Oregon Housing
and Community Services
Department, Single Family
Mortgage Revenue, (AMT),
6.38%, 7/1/27 3,680,075
Aa2 NR 2,000 State of Oregon Housing
and Community Services
Department, Single Family
Mortgage Revenue, (AMT),
6.40%, 7/1/26 2,099,520
Aa2 NR 2,500 State of Oregon Housing
and Community Services
Department, Single Family
Mortgage Revenue, (AMT),
6.45%, 7/1/26 2,633,700
Aa3 NR 2,000 Washington County, OR,
Housing Authority,
Multifamily Revenue
(Bethany Meadows Project),
(AMT), 5.85%, 9/1/27 2,009,000
Aa3 NR 1,390 Washington County, OR,
Housing Authority,
Multifamily Revenue,
(Bethany Meadows Project),
(AMT), 5.75%, 9/1/17 1,396,297
- ---------------------------------------------------------------------------
$ 34,259,359
- ---------------------------------------------------------------------------
Industrial Development Revenue/Pollution Control Revenue -- 9.3%
- ---------------------------------------------------------------------------
Baa2 BBB- $3,500 Oregon Economic
Developments Authority,
Georgia Pacific, (AMT),
6.35%, 8/1/25 $ 3,654,595
NR BBB- 5,000 Port of Astoria, Pollution
Control Revenue, James
River, 6.55%, 2/1/15 5,213,500
NR NR 750 Port of Portland, Ash
Grove Cement Company,
7.25%, 10/1/09 807,728
NR NR 1,000 Port of Portland, North
Portland Crown Zellerbach
Corporation, 6.13%, 5/15/08 1,001,210
- ---------------------------------------------------------------------------
$ 10,677,033
- ---------------------------------------------------------------------------
Insured-Education -- 2.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority (Lewis and Clark
College) (MBIA), 6.00%,
10/1/13 $ 1,060,280
Aaa AAA 1,500 State of Oregon Health,
Housing, Educational and
Cultural Facilities
Authority (Lewis and Clark
College) (MBIA), 6.13%,
10/1/24 1,597,170
- ---------------------------------------------------------------------------
$ 2,657,450
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 3.7%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 City of Eugene, Electric
Utility Revenue (MBIA),
5.80%, 8/1/22 $ 1,031,550
Aaa AAA 500 Commonwealth of Puerto Rico
Electric Power Authority
STRIPES (FSA), Variable
Rate, 7/1/03/(2)/ 558,125
Aaa AAA 1,600 Commonwealth of Puerto
Rico, Telephone Authority
(MBIA), Variable Rate,
1/16/15/(2)/ 1,602,000
Aaa AAA 1,000 Emerald People's Utility
District, Electric System
(AMBAC), 5.75%, 11/1/16 1,026,480
- ---------------------------------------------------------------------------
$ 4,218,155
- ---------------------------------------------------------------------------
Insured-General Obligations -- 2.8%
- ---------------------------------------------------------------------------
Aaa AAA $2,000 Commonwealth of Puerto
Rico "RIBS" (AMBAC),
Variable Rate, 7/1/15/(2)/ $ 2,147,500
Aaa AAA 1,000 Yamhill, Clackamas and
Washington Counties,
Newberg School District
(FSA), 5.50%, 6/1/10 1,025,980
- ---------------------------------------------------------------------------
$ 3,173,480
- ---------------------------------------------------------------------------
Insured-Hospitals -- 1.8%
- ---------------------------------------------------------------------------
Aaa AAA $3,630 Oregon Health Science
University, Capital
Appreciation (MBIA),
0.00%, 7/1/21 $ 976,579
Aaa AAA 1,000 Western Lane Hospital
District Authority,
Sisters of Saint Joseph of
Peace (MBIA), 5.75%, 8/1/19 1,030,900
- ---------------------------------------------------------------------------
$ 2,007,479
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
75
<PAGE>
Oregon Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Lease Revenue/Certificates of
Participation -- 2.5%
- ---------------------------------------------------------------------------
Aaa AAA $1,250 State of Oregon,
Department of General
Services, Real Property
Financing Program (AMBAC),
6.25%, 9/1/15 $ 1,325,925
Aaa AAA 1,500 State of Oregon,
Department of General
Services, Real Property
Financing Program (MBIA),
6.25%, 11/1/19 1,586,895
- ---------------------------------------------------------------------------
$ 2,912,820
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 0.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 City of Portland, Arena
Natural Gas Tax Revenue
(AMBAC),0.00%, 6/1/17 $ 317,880
- ---------------------------------------------------------------------------
$ 317,880
- ---------------------------------------------------------------------------
Insured-Transportation -- 4.8%
- ---------------------------------------------------------------------------
Aaa AAA $1,500 Oregon Department of
Transportation, Westside
Light Rail (MBIA), 6.25%,
6/1/09 $ 1,643,130
Aaa AAA 1,000 Port of Portland, Portland
International Airport
(AMBAC), (AMT), 6.25%,
7/1/18 1,049,130
Aaa AAA 2,750 Port of Portland, Portland
International Airport,
(AMT), (FGIC), 6.00%,
7/1/23 2,817,650
- ---------------------------------------------------------------------------
$ 5,509,910
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 6.0%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 City of Beaverton,
Washington County, Water
Revenue (FSA), 6.13%,
6/1/14 $ 1,059,100
Aaa AAA 1,500 City of Portland, Sewer
System (FGIC), 6.00%,
10/1/12 1,630,545
Aaa AAA 1,000 South Fork Water Board,
First Lien Water Revenue
(FSA), 6.00%, 2/1/14 1,049,790
Aaa AAA 1,500 Washington County, Unified
Sewerage Agency (AMBAC),
6.13%, 10/1/12 1,637,445
Aaa AAA 1,375 Washington County, Unified
Sewerage Agency, Senior
Lien (AMBAC), 6.13%,
10/1/12 1,500,991
- ---------------------------------------------------------------------------
$ 6,877,871
- ---------------------------------------------------------------------------
Lease Revenue/Certificates of Participation -- 1.4%
- ---------------------------------------------------------------------------
Aa A $1,500 Multnomah County, Juvenile
Justice Complex, 6.00%,
8/1/12 $ 1,556,550
- ---------------------------------------------------------------------------
$ 1,556,550
- ---------------------------------------------------------------------------
Special Tax Revenue -- 4.1%
- ---------------------------------------------------------------------------
A NR $1,000 City of Portland, Urban
Renewal and Redevelopment
Bonds, Downtown
Waterfront, 6.40%, 6/1/08 $ 1,063,720
Baa1 A 500 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
6.38%, 7/1/08 535,760
A1 AA+ 3,000 Tri-County Metropolitan
Transportation District,
Limited Tax Pledge, 5.70%,
8/1/13 3,098,610
- ---------------------------------------------------------------------------
$ 4,698,090
- ---------------------------------------------------------------------------
Transportation -- 1.3%
- ---------------------------------------------------------------------------
Baa3 BB+ $1,500 Port of Portland, Special
Obligation Revenue Bonds
(Delta Airlines
Incorporated), (AMT),
6.20%, 9/1/22 $ 1,540,635
- ---------------------------------------------------------------------------
$ 1,540,635
- ---------------------------------------------------------------------------
Water and Sewer -- 3.2%
- ---------------------------------------------------------------------------
A A+ $1,500 City of Gresham, Water
Revenue, 5.20%, 11/1/10 $ 1,502,070
NR A+ 2,000 Clackamus County, Water
Revenue, 6.38%, 10/1/14 2,160,860
- ---------------------------------------------------------------------------
$ 3,662,930
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $108,099,159) $ 114,487,959
- ---------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
See notes to financial statements
76
<PAGE>
Oregon Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
The Portfolio invests primarily in debt securities issued by Oregon
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 August 31, 1997, 24.2% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 3.2% to 9.2% of total investments.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been issued as an inverse floater bond.
See notes to financial statements
77
<PAGE>
South Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 2.9%
- ---------------------------------------------------------------------------
NR A $1,500 South Carolina Education
Authority, Student Loan,
(AMT),
6.30%, 9/1/08 $ 1,570,935
- ---------------------------------------------------------------------------
$ 1,570,935
- ---------------------------------------------------------------------------
Electric Utilities -- 7.0%
- ---------------------------------------------------------------------------
A1 A- $1,650 Berkeley County, SC
Electric and Gas Company,
6.50%, 10/1/14 $ 1,798,253
Baa1 BBB+ 1,400 Puerto Rico Electric Power
Authority, 6.25%, 7/1/17 1,480,906
Baa1 BBB+ 500 Puerto Rico Electric Power
Authority, 6.38%, 7/1/24 544,675
- ---------------------------------------------------------------------------
$ 3,823,834
- ---------------------------------------------------------------------------
Hospitals -- 5.6%
- ---------------------------------------------------------------------------
Aa3 AA- $1,500 Greenville, SC Hospital
System (Board of Trustees),
5.25%, 5/1/17 $ 1,471,035
Baa1 NR 1,500 Horry County, SC (Conway
Hospital), 6.75%, 7/1/12 1,582,380
- ---------------------------------------------------------------------------
$ 3,053,415
- ---------------------------------------------------------------------------
Housing -- 12.9%
- ---------------------------------------------------------------------------
NR BBB+ $1,000 South Carolina Housing
Finance Authority,
Multifamily Mortgage
Revenue (Hunting Ridge)
(AMT), 6.75%, 6/1/25 $ 1,043,490
NR AA- 1,780 South Carolina Housing
Finance Authority,
Multifamily Mortgage
Revenue (Runaway Bay
Apartment), 6.20%, 12/1/20 1,806,771
NR AA 975 South Carolina Housing
Finance Authority,
Multifamily Mortgage
Revenue (Westbury Place),
6.05%, 7/1/27 986,408
Aa AA 1,500 South Carolina Housing
Finance Authority, Single
Family Mortgage Revenue,
6.38%, 7/1/16 1,572,585
Aa2 NR 1,500 South Carolina Housing
Finance Authority, Single
Family Mortgage Revenue,
6.45%, 7/1/17 1,580,310
- ---------------------------------------------------------------------------
$ 6,989,564
- ---------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 32.5%
- ---------------------------------------------------------------------------
Baa2 BBB $1,890 Aiken County, SC Industrial
Development Board (Beloit
Corporation), 6.00%, 12/1/11 $ 2,003,117
NR BBB+ 1,500 Chester County, SC, 7.35%,
2/1/14 1,623,930
A2 A 2,500 Darlington County, SC,
6.00%, 4/1/26 2,589,025
A1 AA- 1,500 Darlington County, SC
(Nucor Corporation), (AMT),
5.75%, 8/1/23 1,509,390
A2 A 500 Darlington County, SC
(Sonoco Products), (AMT),
6.13%, 6/1/25 523,875
A2 A 1,500 Darlington County, SC Power
and Light Company, 6.60%,
11/1/10 1,643,715
Aa3 AA- 500 Florence County, SC (E.I.
du Pont de Nemours), 6.35%,
7/1/22 538,785
NR NR 565 Florence County, SC (Stone
Container Company), 7.38%,
2/1/07 598,538
A1 A- 2,665 Richland County, SC (Union
Camp Corporation), (AMT),
6.75%, 5/1/22 2,878,146
NR NR 1,500 Spartanburg County, SC
Solid Waste (Bavarian Motor
Works Corporation), (AMT),
7.55%, 11/1/24 1,684,680
A2 A+ 2,000 York County, SC (Hoechst
Celanese Corporation),
(AMT),
5.70%, 1/1/24 2,025,360
- ---------------------------------------------------------------------------
$17,618,561
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 8.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 300 Piedmont Municipal Power
Agency (MBIA), 6.25%, 1/1/09 $ 334,473
Aaa AAA 1,000 Piedmont Municipal Power
Agency (MBIA), 6.30%, 1/1/14 1,077,490
Aaa AAA 1,250 South Carolina Public
Service Authority (AMBAC),
6.38%, 7/1/21 1,357,850
Aa AA- 1,000 South Carolina Public
Service Authority (MBIA),
5.13%, 1/1/32 933,590
Aaa AAA 1,000 South Carolina Public
Service Authority (Santee
Cooper) (AMBAC),
5.00%, 1/1/14 966,340
- ---------------------------------------------------------------------------
$ 4,669,743
- ---------------------------------------------------------------------------
</TABLE>
See notes to financial statements
78
<PAGE>
South Carolina Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations -- 2.0%
- --------------------------------------------------------------------------
Aaa AAA $1,000 Berkeley County, SC School
District (AMBAC), 6.30%,
2/1/16 $ 1,072,040
- --------------------------------------------------------------------------
$ 1,072,040
- --------------------------------------------------------------------------
Insured-Hospitals -- 14.3%
- --------------------------------------------------------------------------
Aaa AAA $1,500 Greenwood County, Self
Memorial Hospital (FGIC),
5.88%, 10/1/17 $ 1,541,175
Aaa AAA 300 Lexington County Health
Services District (FSA),
6.75%, 10/1/18 328,758
Aaa AAA 3,000 South Carolina Jobs
Economic Development
Authority (Anderson Area
Medical Center) (MBIA),
5.25%, 2/1/26 2,876,040
Aaa AAA 1,000 South Carolina Jobs
Economic Development
Authority (Baptist
Hospital) (AMBAC), 5.45%,
8/1/15 986,450
Aaa AAA 1,000 South Carolina Jobs
Economic Development
Authority (Baptist
Hospital) (AMBAC), Variable
Rate, 8/1/15 /(1)/ 972,500
NR AAA 1,000 South Carolina Jobs
Economic Development
Authority, Oconee Memorial
Hospital (CLI),
6.15%, 3/1/25 1,047,620
- --------------------------------------------------------------------------
$ 7,752,543
- --------------------------------------------------------------------------
Insured-Housing -- 1.9%
- --------------------------------------------------------------------------
Aaa AAA $1,000 South Carolina Housing
Finance and Development
Authority, Single Family
Mortgage Revenue (AMBAC),
(AMT), 5.95%, 7/1/29 $ 1,015,040
- --------------------------------------------------------------------------
$ 1,015,040
- --------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 6.8%
- --------------------------------------------------------------------------
Aaa AAA $ 500 Charleston County, SC
(MBIA), 6.10%, 6/1/11 $ 534,110
Aaa AAA 955 Charleston County, SC
(MBIA), 7.00%, 6/1/19 1,101,058
Aaa AAA 45 Charleston County, SC
(MBIA), 7.00%, 6/1/19 50,746
Aaa AAA 1,000 Florence County, SC Law
Center (AMBAC), 6.00%,
3/1/14 1,045,400
Aaa AAA 900 North Charleston, SC
(Coliseum Capital
Improvements) (FGIC),
6.00%, 1/1/11 948,996
- --------------------------------------------------------------------------
$ 3,680,310
- --------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 4.9%
- --------------------------------------------------------------------------
Baa NR $ 750 Lexington School District,
6.90%, 7/1/08 $ 823,515
Baa1 BBB+ 1,750 Myrtle Beach Convention
Center, 6.88%, 7/1/17 1,846,705
- --------------------------------------------------------------------------
$ 2,670,220
- --------------------------------------------------------------------------
Pooled Loans -- 0.6%
- --------------------------------------------------------------------------
NR A+ $ 300 South Carolina Resource
Authority, Local Government
Program, 7.00%, 4/1/13 $ 309,684
- --------------------------------------------------------------------------
$ 309,684
- --------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $50,167,834) $54,225,889
- --------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax
preference item for the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by South Carolina
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 August 31, 1997, 33.6% 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 0.6% to 13.7% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
See notes to financial statements
79
<PAGE>
Tennessee Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 2.0%
- --------------------------------------------------------------------------------
Baa3 NR $1,000 Nashville and Davidson
County (Belmont
University),
6.40%, 12/1/19 $ 1,052,640
- --------------------------------------------------------------------------------
$ 1,052,640
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.9%
- --------------------------------------------------------------------------------
Aaa AAA $1,500 Shelby County (Lebonheur
Children's Hospital),
(MBIA), 5.50%, 8/15/12 $ 1,541,475
- --------------------------------------------------------------------------------
$ 1,541,475
- --------------------------------------------------------------------------------
General Obligations -- 3.8%
- --------------------------------------------------------------------------------
Aa AA $1,000 Metropolitan Government
Nashville and Davidson
County, 5.88%, 5/15/21 $ 1,034,050
Aa2 AA+ 1,000 Shelby County, 5.13%, 3/1/16 975,950
- --------------------------------------------------------------------------------
$ 2,010,000
- --------------------------------------------------------------------------------
Hospitals -- 4.6%
- --------------------------------------------------------------------------------
Baa1 NR $ 500 City of Clarksville,
Clarksville Memorial,
6.25%, 7/1/08 $ 524,160
Baa1 NR 500 City of Clarksville,
Clarksville Memorial,
6.38%, 7/1/18 518,970
Baa1 BBB+ 250 Knox County (East Tennessee
Children's), 6.50%, 10/1/12 261,293
NR A- 1,000 Sumner County, Sumner
Regional Health Systems,
7.50%, 11/1/14 1,121,160
- --------------------------------------------------------------------------------
$ 2,425,583
- --------------------------------------------------------------------------------
Housing -- 15.8%
- --------------------------------------------------------------------------------
NR A $ 750 Knoxville Community
Development Corporation
(Clinton Towers),
6.65%, 10/15/10 $ 785,828
NR AAA 500 Knoxville Community
Development Corporation
(Morningside Gardens)
(GNMA), 6.10%, 7/20/20 512,535
NR A 1,500 Nashville and Davidson
County (The Park at
Hermitage), 5.90%, 2/1/19 1,498,110
Aa2 AA 445 Tennessee Housing
Development Agency,
Homeownership Program,
6.80%, 7/1/17 467,481
Aa AA 1,000 Tennessee Housing
Development Agency,
Homeownership Program,
(AMT), 5.75%, 7/1/24 998,550
A1 A+ 2,000 Tennessee Housing
Development Agency,
Mortgage Finance Program,
5.85%, 7/1/13 2,038,819
A1 A+ 2,000 Tennessee Housing
Development Agency,
Mortgage Finance Program,
5.95%, 7/1/28 2,032,340
- --------------------------------------------------------------------------------
$ 8,333,663
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 27.5%
- --------------------------------------------------------------------------------
Aa3 A-1+ $1,000 City of Chattanooga (E.I.
du Pont de Nemours and
Co.), 6.35%, 7/1/22 $ 1,083,920
Aa3 AA- 1,000 Humphreys County (E.I. du
Pont de Nemours and Co.),
(AMT), 6.70%, 5/1/24 1,094,970
Aa2 AA 2,000 Loudon County
(Kimberly-Clark Corp.),
(AMT), 6.20%, 2/1/23/(1)/ 2,099,159
A3 A- 2,750 Maury County (Saturn
Corp.), 6.50%, 9/1/24 2,999,424
Baa1 BBB 1,500 McMinn County,TN (Calhoun
Newsprint Co. Project -
Bowater Inc.), (AMT),
7.40%, 12/1/22 1,666,935
Baa2 BBB 1,500 Memphis-Shelby County
Airport Authority (Federal
Express Corp.), 6.75%,
9/1/12 1,637,220
Baa2 BBB 1,000 Memphis-Shelby County
Airport Authority (Federal
Express Corp.), (AMT),
6.20%, 7/1/14 1,030,840
NR BBB+ 500 Nashville and Davidson
County (Osco Treatment
Systems), (AMT), 6.00%,
5/1/03 518,220
Baa3 BBB- 1,250 Puerto Rico Port Authority
(American Airlines), 6.25%,
6/1/26 1,328,363
A3 NR 1,000 South Fulton County, (Tyson
Foods Co.), (AMT), 6.40%,
10/1/20 1,054,100
- --------------------------------------------------------------------------------
$14,513,151
- --------------------------------------------------------------------------------
Insured-Education -- 6.4%
- --------------------------------------------------------------------------------
Aaa AAA $1,100 Jackson, TN Health,
Education and Housing
(Lambuth University),
(FSA), 5.90%, 9/1/20 $ 1,122,484
</TABLE>
See notes to financial statements
80
<PAGE>
Tennessee Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education (continued)
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Metropolitan Nashville
Health and Education
(Meharry Medical College),
(AMBAC), 5.00%, 12/1/24 $ 931,060
Aaa AAA 1,230 Metropolitan Nashville
Health and Education
(Meharry Medical College),
(AMBAC), 6.00%, 12/1/19 1,334,858
- ---------------------------------------------------------------------------
$ 3,388,402
- ---------------------------------------------------------------------------
Insured-Electric Utilities -- 8.2%
- ---------------------------------------------------------------------------
Aaa AAA $ 750 City of Dickson, Electric
System Revenues (MBIA),
5.50%, 9/1/16 $ 758,340
Aaa AAA 1,000 City of Lawrenceburg
Electric Revenues (MBIA),
5.50%, 7/1/26 1,000,780
Aaa AAA 1,000 City of Lawrenceburg
Electric Revenues (MBIA),
6.63%, 7/1/18 1,171,460
Aaa AAA 400 Commonwealth of Puerto Rico
Electric Power Authority
STRIPES (FSA), Variable
Rate, 7/1/03/(2)/ 446,500
Aaa AAA 1,000 Madison County Suburban
Utility District, (MBIA),
5.00%, 2/1/19 943,480
- ---------------------------------------------------------------------------
$ 4,320,560
- ---------------------------------------------------------------------------
Insured-General Obligations -- 0.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 300 Commonwealth of Puerto Rico
"RIBS" (AMBAC), Variable
Rate, 7/1/15/(2)/ $ 322,125
- ---------------------------------------------------------------------------
$ 322,125
- ---------------------------------------------------------------------------
Insured-Hospitals -- 6.7%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 City of Bristol, Bristol
Memorial (FGIC), 6.75%,
9/1/10 $ 585,555
Aaa AAA 250 City of Chattanooga,
Memorial Hospital (MBIA),
6.63%, 9/1/09 289,530
Aaa AAA 1,500 City of Johnson, Johnson
City Medical Center (MBIA),
5.00%, 7/1/13 1,463,055
Aaa AAA 1,250 Knox County, Fort Sanders
Alliance Obligated Group
(MBIA), 5.25%, 1/1/23 1,197,575
- ---------------------------------------------------------------------------
$ 3,535,715
- ---------------------------------------------------------------------------
Insured-Housing -- 2.1%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Knox County, SCA Realty
Multifamily Mortgage
Receipts (FSA),
7.13%, 1/1/30 $ 1,091,690
- ---------------------------------------------------------------------------
$ 1,091,690
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.2%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 City of Johnson, School
District Sales Tax (AMBAC),
6.70%, 5/1/21 $ 1,140,640
- ---------------------------------------------------------------------------
$ 1,140,640
- ---------------------------------------------------------------------------
Insured-Transportation -- 2.1%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Memphis-Shelby County
Airport Authority (MBIA),
(AMT), 6.50%, 2/15/09 $ 1,121,270
- ---------------------------------------------------------------------------
$ 1,121,270
- ---------------------------------------------------------------------------
Insured-Water and Sewer -- 2.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 350 Nashville and Davidson
County, Water System
(AMBAC), Variable Rate,
1/1/22/(2)/ $ 381,063
Aaa AAA 1,000 Nashville and Davidson
County, Water System
(FGIC), 5.20%, 1/1/13 1,008,890
- ---------------------------------------------------------------------------
$ 1,389,953
- ---------------------------------------------------------------------------
Miscellaneous -- 1.0%
- ---------------------------------------------------------------------------
NR NR $ 500 Hardeman County, TN
(Correctional Facilities
Corp.), 7.75%, 8/1/17 $ 543,675
- ---------------------------------------------------------------------------
$ 543,675
- ---------------------------------------------------------------------------
Nursing Homes -- 2.0%
- ---------------------------------------------------------------------------
NR A+ $1,000 Tennessee State Veterans'
Homes Board, Humboldt,
6.65%, 2/1/14 $ 1,081,180
- ---------------------------------------------------------------------------
$ 1,081,180
- ---------------------------------------------------------------------------
Pooled Loans -- 3.7%
- ---------------------------------------------------------------------------
NR A- $1,200 Tennessee Local Development
Authority, Community
Provider, 6.55%, 10/1/23 $ 1,272,372
</TABLE>
See notes to financial statements
81
<PAGE>
Tennessee Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pooled Loans (continued)
- --------------------------------------------------------------------------------
A AA- $ 700 Tennessee Local Development
Authority, State Loan
Program, 5.00%, 3/1/15 $ 678,559
- --------------------------------------------------------------------------------
$ 1,950,931
- --------------------------------------------------------------------------------
Special Tax Revenue -- 2.8%
- --------------------------------------------------------------------------------
Baa1 A $1,575 Commonwealth of Puerto Rico
Highway and Transportation
Authority, 5.00%, 7/1/36 $ 1,460,954
- --------------------------------------------------------------------------------
$ 1,460,954
- --------------------------------------------------------------------------------
Transportation -- 2.0%
- --------------------------------------------------------------------------------
NR BBB $1,000 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 1,069,250
- --------------------------------------------------------------------------------
$ 1,069,250
- --------------------------------------------------------------------------------
Water and Sewer -- 1.0%
- --------------------------------------------------------------------------------
NR A $ 250 Hamilton County, Eastside
Utility District, 6.50%,
11/1/05 $ 266,548
NR A 250 Hamilton County, Eastside
Utility District, 6.75%,
11/1/11 266,438
- --------------------------------------------------------------------------------
$ 532,986
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $49,525,469) $52,825,843
- --------------------------------------------------------------------------------
</TABLE>
AMT- Interest earned from these securities may be considered
a tax preference item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Tennessee
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 August 31, 1997, 33.8% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 3.0% to 18.0% of total investments.
(1) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(2) Security has been issued as an inverse floater bond.
See notes to financial statements
82
<PAGE>
Virginia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Standard Amount
& (000
Moody's Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Education -- 4.6%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR A- $2,000 City of Lynchburgh
(Randolph-Macon Woman's
College), 5.88%, 9/1/23 $ 2,036,380
Baa3 NR 2,220 Rockingham County,
Industrial Development
Authority (Bridgewater
College), 5.95%, 10/1/13 2,258,317
NR A- 1,570 Virginia College Building
Authority (Hampden-Sydney
College), 6.60%, 9/1/16 1,677,058
NR A+ 1,000 Virginia College Building
Authority (Hampton
University), 5.75%, 4/1/14 1,024,000
NR A+ 400 Virginia College Building
Authority (Hampton
University), 6.50%, 4/1/08 432,228
- --------------------------------------------------------------------------------
$ 7,427,983
- --------------------------------------------------------------------------------
Electric Utilities -- 0.6%
- --------------------------------------------------------------------------------
Ba NR $ 965 Virgin Islands Water and
Sewer Authority, 7.40%,
7/1/11 $ 1,040,810
- --------------------------------------------------------------------------------
$ 1,040,810
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 3.1%
- --------------------------------------------------------------------------------
Aaa AAA $1,665 Arlington County,
Industrial Development
Authority (AMBAC), 5.00%,
9/1/21 $ 1,556,875
Aaa NR 1,000 Arlington County,
Industrial Development
Authority, (Arlington
Hospital), 7.13%, 9/1/21 1,119,210
A NR 500 Augusta County, Industrial
Development Authority
(Augusta Hospital), 7.00%,
9/1/21 555,765
NR A+ 1,700 City of Virginia Beach,
Water and Sewer System,
6.63%, 2/1/17 1,875,219
- --------------------------------------------------------------------------------
$ 5,107,069
- --------------------------------------------------------------------------------
General Obligations -- 1.4%
- --------------------------------------------------------------------------------
Baa1 A $ 350 Commonwealth of Puerto
Rico, 0.00%, 7/1/04 $ 252,028
Aaa AAA 1,000 Fairfax County, 5.63%,
6/1/14 1,026,150
Aa2 AA 1,000 Roanoke County, VA,
5.00%, 6/1/21 942,910
- --------------------------------------------------------------------------------
$ 2,221,088
- --------------------------------------------------------------------------------
Hospitals -- 16.9%
- --------------------------------------------------------------------------------
A2 NR $3,800 Albermarle County,
Industrial Development
Authority (Martha
Jefferson Hospital),
5.50%, 10/1/20 $ 3,755,730
A2 NR 245 Chesapeake Hospital
Authority (Chesapeake
General Hospital), 7.60%,
7/1/00 261,996
A2 NR 1,250 City of Martinsville
(Memorial Hospital of
Martinsville and Henry
County), 7.00%, 1/1/06 1,352,013
Aa2 AA 2,910 Fairfax County, Industrial
Development Authority
(Inova Health System
Hospitals), 5.00%, 8/15/14 2,811,467
Aa2 AA 2,000 Fairfax County, Industrial
Development Authority
(Inova Health System
Hospitals),
5.00%, 8/15/15 1,920,920
Aa2 AA 2,500 Fairfax County, Industrial
Development Authority
(Inova Health System
Hospitals),
5.00%, 8/15/23 2,344,625
Aa2 AA 1,000 Fairfax County, Industrial
Development Authority
(Inova Health System
Hospitals),
6.00%, 8/15/26 1,034,070
NR A- 2,000 Medical College of Hampton
Roads, 6.88%, 11/15/11 2,156,460
Aa2 AA- 3,500 Peninsula Ports Authority
of Virginia, (Riverside
Health System),
6.63%, 7/1/10 3,791,865
A2 NR 2,400 Prince William County,
Industrial Development
Authority (Potomac
Hospital), 6.85%, 10/1/25 2,607,192
Aa2 AA 3,000 Virginia Beach Development
Authority (Sentara Bayside
Hospital), 6.60%, 11/1/09 3,249,780
A3 NR 1,000 Washington County,
Industrial Development
Authority (Johnston
Memorial Hospital),
6.00%, 7/1/14 1,024,530
</TABLE>
See notes to financial statements
83
<PAGE>
Virginia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals (continued)
- --------------------------------------------------------------------------------
A3 NR $1,060 Washington County, Industrial
Development Authority
(Johnston Memorial Hospital),
7.00%, 7/1/22 $ 1,144,832
- --------------------------------------------------------------------------------
$ 27,455,480
- --------------------------------------------------------------------------------
Housing -- 11.6%
- --------------------------------------------------------------------------------
NR AAA $1,250 Fairfax County Redevelopment
and Housing Authority
Multifamily Mortgage Revenue,
FHA, 7.00%, 5/1/26 $ 1,333,325
NR AAA 1,000 Hampton Redevelopment and
Housing Authority, Senior
Living (GNMA), 6.00%, 1/20/26 1,024,810
NR AAA 1,000 Newport News, Redevelopment
and Housing Authority, MFMR,
5.85%, 12/20/30/(1)/ 1,019,160
NR AAA 1,800 Suffolk Redevelopment and
Housing Authority (Prince
Williams Commons) (FNMA),
6.45%, 6/1/19 1,895,526
Aa1 AA+ 3,500 Virginia Housing Development
Authority, Multifamily Mortgage
Revenue, 7.05%, 5/1/18 3,734,465
Aa AA+ 5,000 Virginia Housing Development
Authority, Multifamily Mortgage
Revenue, (AMT), 6.75%, 7/1/21 5,237,650
Aa1 AA+ 2,500 Virginia Housing Development
Authority, Single Family
Mortgage Revenue, 6.85%, 1/1/15 2,643,125
Aa NR 1,900 Virginia Housing Development
Authority, Single Family
Mortgage Revenue, Variable
Rate, 7/1/04/(2)/ 1,949,875
- --------------------------------------------------------------------------------
$ 18,837,936
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution Control Revenue -- 13.1%
- --------------------------------------------------------------------------------
Aa3 AA- $2,190 City of Chesapeake (Cargill
Inc.), 5.88%, 3/1/13 $ 2,271,293
A2 A+ 2,000 City of Giles (Hoechst Celanese
Corp.), 6.45%, 5/1/26 2,156,020
A2 A+ 1,500 City of Giles (Hoechst Celanese
Corp.), (AMT), 5.95%, 12/1/25 1,543,335
A2 A+ 1,000 City of Giles (Hoechst Celanese
Corp.), (AMT), 6.63%, 12/1/22 1,070,080
A3 A 2,000 Henrico County (Browning Ferris
Inc.), (AMT), 5.45%, 1/1/14/(3)/ 2,000,260
A1 A- 4,000 Isle of Wright County,
Industrial Development
Authority (Union Camp Corp.),
(AMT), 6.55%, 4/1/24/(4)/ 4,314,040
Baa3 BBB- 1,000 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 1,062,690
Baa3 BBB 980 West Point (Chesapeake Corp.),
6.25%, 3/1/19 1,030,891
Baa3 BBB 5,520 West Point (Chesapeake Corp.),
(AMT), 6.38%, 3/1/19 5,804,831
- --------------------------------------------------------------------------------
$ 21,253,440
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 0.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 900 Commonwealth of Puerto Rico,
Telephone Authority (MBIA),
Variable Rate, 1/16/15/(2)/ $ 901,125
- --------------------------------------------------------------------------------
$ 901,125
- --------------------------------------------------------------------------------
Insured-General Obligations -- 3.3%
- --------------------------------------------------------------------------------
Aaa AAA $5,650 City of Richmond (FGIC),
5.00%, 1/15/21/(4)/ $ 5,315,858
- --------------------------------------------------------------------------------
$ 5,315,858
- --------------------------------------------------------------------------------
Insured-Hospitals -- 12.1%
- --------------------------------------------------------------------------------
Aaa AAA $5,000 Augusta County, Industrial
Development Authority (Augusta
Hospital Corp.) (AMBAC),
5.13%, 9/1/21 $ 4,745,350
Aaa AAA 3,835 City of Fredericksburg,
Industrial Development
Authority (AMBAC), 5.25%,
6/15/23 3,698,244
Aaa AAA 665 City of Roanoke (Franklin
Memorial Hospital and Saint
Albans Psychiatric Hospital)
(MBIA), 5.25%, 7/1/25 637,742
Aaa AAA 5,000 City of Virginia Beach
(Virginia Beach Memorial
Hospital) (AMBAC), 5.13%,
2/15/18 4,812,850
</TABLE>
See notes to financial statements
84
<PAGE>
Virginia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Insured-Hospitals (continued)
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Aaa AAA $2,000 City of Winchester,
Industrial Development
Authority (Winchester
Medical Center) (AMBAC),
Variable Rate, 1/21/14/(2)/ $ 2,345,000
Aaa AAA 1,500 Henrico County (Bon Secour
Health Systems) (MBIA),
6.25%, 8/15/20 1,679,355
Aaa AAA 1,800 Roanoke County, VA
Industrial Development
Authority (MBIA), 5.00%,
7/1/24 1,676,754
- --------------------------------------------------------------------------------
$ 19,595,295
- --------------------------------------------------------------------------------
Insured-Transportation -- 4.1%
- --------------------------------------------------------------------------------
Aaa AAA $4,800 Chesapeake Bay Bridge and
Tunnel Dist. (MBIA),
5.00%, 7/1/22 $ 4,507,536
Aaa AAA 1,000 Metropolitan Washington
Airports Authority (MBIA),
(AMT), 5.75%, 10/1/20 1,008,390
Aaa AAA 1,000 Richmond Metropolitan
Authority Expressway
(FGIC), 6.38%, 7/15/16 1,087,220
- --------------------------------------------------------------------------------
$ 6,603,146
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 7.2%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Loudoun County Sanitation
Authority (FGIC), 5.13%,
1/1/30 $ 953,690
Aaa AAA 2,000 Loudoun County Sanitation
Authority (MBIA), 5.25%,
1/1/30 1,921,740
Aaa AAA 1,000 Roanoke County, VA Water
and Sewer Authority
(FGIC), 5.00%, 7/1/21 939,000
Aaa AAA 1,000 Upper Occoquan Sewage
Authority (FGIC), 5.00%,
7/1/15 956,690
Aaa AAA 2,000 Upper Occoquan Sewage
Authority (MBIA), 4.75%,
7/1/29 1,767,440
Aaa AAA 4,500 Upper Occoquan Sewage
Authority (MBIA), 5.00%,
7/1/25 4,211,280
Aaa AAA 1,000 Upper Occoquan Sewage
Authority (MBIA), 5.15%,
7/1/20 971,170
- --------------------------------------------------------------------------------
$ 11,721,010
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------ Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 5.7%
- --------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Aa AA $2,000 Henrico County, Industrial
Development Authority,
Lease, 7.00%, 8/1/13 $ 2,278,900
Aa AA 2,250 Henrico County, Industrial
Development Authority,
Lease, 7.12%, 8/1/21 2,583,518
NR NR 1,250 King George County, Lease,
7.00%, 12/15/12 1,314,463
A NR 3,000 Rockingham and
Harrisonburg Counties,
Harrisonburg Redevelopment
and Housing Authority,
6.50%, 9/1/14 3,120,720
- --------------------------------------------------------------------------------
$ 9,297,601
- --------------------------------------------------------------------------------
Life Care -- 1.4%
- --------------------------------------------------------------------------------
NR NR $2,000 Loudoun County, VA,
Industrial Development
Authority (Falcons
Landing), 8.75%, 11/1/24 $ 2,253,480
- --------------------------------------------------------------------------------
$ 2,253,480
- --------------------------------------------------------------------------------
Nursing Homes -- 0.2%
- --------------------------------------------------------------------------------
NR NR $ 270 Covington-Allegheny
County, VA, IDA (Beverly
Enterprises), 9.38%, 9/1/01 $ 295,601
- --------------------------------------------------------------------------------
$ 295,601
- --------------------------------------------------------------------------------
Solid Waste -- 3.3%
- --------------------------------------------------------------------------------
A1 A+ $ 915 Fairfax County Economic
Development Authority
(Ogden Martin Systems of
Fairfax Inc.), (AMT),
7.75%, 2/1/11 $ 980,322
A1 A+ 2,000 James City County, IDA,
(Anheuser Busch), (AMT),
6.00%, 4/1/32 2,059,920
Baa1 A- 2,250 Southeastern Public
Service Authority, Solid
Waste Systems, (AMT),
6.00%, 7/1/13 2,293,403
- --------------------------------------------------------------------------------
$ 5,333,645
- --------------------------------------------------------------------------------
Special Tax Revenue -- 5.5%
- --------------------------------------------------------------------------------
Baa1 A $ 500 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/22 $ 461,235
</TABLE>
See notes to financial statements
85
<PAGE>
Virginia Municipals Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special Tax Revenue (continued)
- -------------------------------------------------------------------------------
Baa1 A $1,500 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/36 $ 1,391,385
Baa1 A 1,500 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.50%, 7/1/36 1,487,970
NR NR 4,000 Virgin Islands Public
Finance Authority, 7.25%,
10/1/18 4,452,400
Aa AA 1,000 Virginia State
Transportation Board
Revenue, Route 28,
Variable Rate, 4/1/18/(2)/ 1,170,000
- -------------------------------------------------------------------------------
$ 8,962,990
- -------------------------------------------------------------------------------
Transportation -- 1.0%
- -------------------------------------------------------------------------------
NR BBB $ 400 Charlottesville-Albermarle
VA Airport Authority,
(AMT), 6.13%, 12/1/13 $ 409,540
Aa A+ 1,250 Virginia Port Authority,
(AMT), 5.90%, 7/1/16 1,284,138
- -------------------------------------------------------------------------------
$ 1,693,678
- -------------------------------------------------------------------------------
Water and Sewer -- 4.3%
- -------------------------------------------------------------------------------
Aa2 AA $3,595 Fairfax County, VA Water
Authority, 5.00%, 4/1/16 $ 3,447,785
Aa2 AA- 1,000 Fairfax County, VA Water
Authority, Variable Rate,
4/1/29/(2)/ 1,031,250
Aa2 AA 1,500 Fairfax County, Water
Authority, 5.00%, 4/1/21 1,428,105
NR AA 1,000 Virginia Resource
Authority (Hopewell Waste
Water), (AMT), 6.00%,
10/1/25 1,028,120
- -------------------------------------------------------------------------------
$ 6,935,260
- -------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $150,623,953) $162,252,495
- -------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered
a tax preference item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by Virginia
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 August 31, 1997, 28.2% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage by financial
institution ranged from 5.7% to 11.9% of total investments.
/(1)/ When-issued security.
/(2)/ Security has been issued as an inverse floater bond.
/(3)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(4)/ Security has been segregated to cover when-issued securities.
See notes to financial statements
86
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Alabama Arkansas Georgia Kentucky
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 94,504,048 $ 58,959,622 $ 87,597,730 $115,387,827
Unrealized appreciation 6,686,871 3,367,276 6,104,443 8,011,430
- -----------------------------------------------------------------------------------------------------------------------------------
Investments at value (Note 1A) $101,190,919 $ 62,326,898 $ 93,702,173 $123,399,257
- -----------------------------------------------------------------------------------------------------------------------------------
Cash $ 634 $ 223 $ 136,373 $ 590
Receivable for investments sold 3,014,581 -- -- 1,002,203
Interest receivable 1,599,550 942,041 1,291,935 2,096,970
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 27,625 28,688 38,250 35,594
Deferred organization expenses (Note 1D) 615 2,165 1,118 511
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $105,833,924 $ 63,300,015 $ 95,169,849 $126,535,125
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ -- $ -- $ -- $ 1,012,509
Payable for when-issued securities (Note 1G) 2,436,346 -- -- 1,225,595
Demand note payable (Note 5) 1,030,000 602,000 -- 1,171,000
Payable to affiliate for Trustees' fees (Note 2) 3,673 8,500 2,842 3,673
Accrued expenses 7,908 3,697 4,940 12,144
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 3,477,927 $ 614,197 $ 7,782 $ 3,424,921
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $102,355,997 $ 62,685,818 $ 95,162,067 $123,110,204
- -----------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 95,697,044 $ 59,305,346 $ 89,096,279 $115,134,745
Net unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 6,658,953 3,380,472 6,065,788 7,975,459
- -----------------------------------------------------------------------------------------------------------------------------------
Total $102,355,997 $ 62,685,818 $ 95,162,067 $123,110,204
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
87
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Louisiana Maryland Missouri North Carolina
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $ 32,155,616 $101,424,067 $ 73,588,023 $153,838,803
Unrealized appreciation 1,706,107 5,084,031 5,991,218 12,514,904
- ------------------------------------------------------------------------------------------------------------------------------------
Investments at value (Note 1A) $ 33,861,723 $106,508,098 $ 79,579,241 $166,353,707
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 534 $ 1,269,716 $ 222,850 $ 542
Receivable for investments sold 198,217 -- 15,000 1,450,314
Interest receivable 611,804 1,502,681 1,017,826 2,616,153
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 20,188 44,625 31,875 111,563
Deferred organization expenses (Note 1D) 2,048 824 549 1,583
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 34,694,514 $109,325,944 $ 80,867,341 $170,533,862
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ -- $ 1,921,107 $ -- $ --
Payable for when-issued securities (Note 1G) -- -- 980,840 1,917,768
Demand note payable (Note 5) 260,000 -- -- 1,030,000
Payable to affiliate for Trustees' fees (Note 2) 277 1,225 1,137 4,782
Accrued expenses 2,108 2,525 3,648 10,348
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 262,385 $ 1,924,857 $ 985,625 $ 2,962,898
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 34,432,129 $107,401,087 $ 79,881,716 $167,570,964
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 32,746,423 $102,296,529 $ 73,922,711 $155,168,804
Net unrealized appreciation of investments and
financial futures contracts (computed on the
basis of identified cost) 1,685,706 5,104,558 5,959,005 12,402,160
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 34,432,129 $107,401,087 $ 79,881,716 $167,570,964
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
88
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of August 31, 1997
<TABLE>
<CAPTION>
Oregon South Carolina Tennessee Virginia
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments --
Identified cost $108,099,159 $ 50,167,834 $ 49,525,469 $150,623,953
Unrealized appreciation 6,388,800 4,058,055 3,300,374 11,628,542
- ------------------------------------------------------------------------------------------------------------------------------------
Investments at value (Note 1A) $114,487,959 $ 54,225,889 $ 52,825,843 $162,252,495
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 982,121 $ 1,714 $ 525,900 $ 591
Receivable for investments sold -- -- -- 55,000
Interest receivable 1,569,621 778,518 790,748 2,530,816
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 53,125 -- 22,313 70,125
Deferred organization expenses (Note 1D) 848 2,091 1,084 1,258
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $117,093,674 $ 55,008,212 $ 54,165,888 $164,910,285
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ 3,391,641 $ -- $ -- $ --
Payable for when-issued securities (Note 1G) -- -- -- 1,002,275
Demand note payable (Note 5) -- 1,024,000 -- 2,243,000
Payable to affiliate for Trustees' fees (Note 2) 1,469 8,500 1,137 --
Accrued expenses 7,798 5,787 3,071 7,478
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 3,400,908 $ 1,038,287 $ 4,208 $ 3,252,753
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in $113,692,766 $ 53,969,925 $ 54,161,680 $161,657,532
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and $107,253,029 $ 49,911,870 $ 50,883,855 $149,996,733
withdrawals
Net unrealized appreciation of investments and
financial futures contracts (computed on the 6,439,737 4,058,055 3,277,825 11,660,799
basis of identified cost)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $113,692,766 $ 53,969,925 $ 54,161,680 $161,657,532
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
89
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Alabama Arkansas Georgia Kentucky
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income $ 6,316,866 $ 4,035,314 $ 6,140,376 $ 7,729,597
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 6,316,866 $ 4,035,314 $ 6,140,376 $ 7,729,597
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 412,072 $ 231,998 $ 393,961 $ 519,193
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 10,909 14,093 9,408 11,049
Custodian fee (Note 1I) 61,653 38,788 50,907 73,486
Legal and accounting services 21,733 19,705 21,650 21,736
Interest expense -- 16,640 -- --
Bond pricing 7,039 6,552 8,245 7,824
Registration fees -- -- 300 --
Amortization of organization expenses (Note 1D) 1,570 1,504 2,194 1,321
Miscellaneous 17,100 6,174 12,534 18,152
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 532,076 $ 335,454 $ 499,199 $ 652,761
- ------------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 16,577 $ 7,660 $ 18,234 $ 37,997
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 16,577 $ 7,660 $ 18,234 $ 37,997
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 515,499 $ 327,794 $ 480,965 $ 614,764
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 5,801,367 $ 3,707,520 $ 5,659,411 $ 7,114,833
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,183,334 $ 625,853 $ 1,286,804 $ 1,701,774
Financial futures contracts (1,146,882) (822,716) (667,216) (910,896)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions $ 36,452 $ (196,863) $ 619,588 $ 790,878
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 3,988,781 $ 2,399,033 $ 3,062,722 $ 4,678,860
Financial futures contracts (129,617) (54,602) (192,887) (2,894)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 3,859,164 $ 2,344,431 $ 2,869,835 $ 4,675,966
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 3,895,616 $ 2,147,568 $ 3,489,423 $ 5,466,844
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,696,983 $ 5,855,088 $ 9,148,834 $ 12,581,677
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
90
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Louisiana Maryland Missouri North Carolina
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income $ 2,176,759 $ 6,364,764 $ 4,905,400 $ 10,789,698
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 2,176,759 $ 6,364,764 $ 4,905,400 $ 10,789,698
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 80,898 $ 423,543 $ 297,922 $ 764,004
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 1,652 8,463 7,141 14,264
Custodian fee (Note 1I) 21,538 54,410 47,507 96,082
Legal and accounting services 19,723 21,734 19,730 24,858
Bond pricing 7,686 7,489 8,486 9,830
Amortization of organization expenses (Note 1D) 1,292 1,518 1,405 3,365
Registration fees 1,250 -- -- --
Miscellaneous 4,084 9,165 3,947 20,056
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 138,123 $ 526,322 $ 386,138 $ 932,459
- -----------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 6,051 $ 29,767 $ 11,610 $ 33,398
- -----------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 6,051 $ 29,767 $ 11,610 $ 33,398
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 132,072 $ 496,555 $ 374,528 $ 899,061
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,044,687 $ 5,868,209 $ 4,530,872 $ 9,890,637
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 256,231 $ 1,829,006 $ 608,146 $ 3,315,145
Financial futures contracts (239,126) (1,245,365) (560,548) (1,114,908)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments $ 17,105 $ 583,641 $ 47,598 $ 2,200,237
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 1,202,330 $ 3,846,608 $ 3,870,313 $ 4,613,100
Financial futures contracts (52,439) (81,171) (160,739) (234,793)
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 1,149,891 $ 3,765,437 $ 3,709,574 $ 4,378,307
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 1,166,996 $ 4,349,078 $ 3,757,172 $ 6,578,544
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,211,683 $ 10,217,287 $ 8,288,044 $ 16,469,181
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
91
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Oregon South Carolina Tennessee Virginia
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income $ 7,307,579 $ 3,455,342 $ 3,259,146 $ 10,304,982
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 7,307,579 $ 3,455,342 $ 3,259,146 $ 10,304,982
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 488,080 $ 177,252 $ 167,958 $ 726,536
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,718 14,092 6,737 14,217
Custodian fee (Note 1I) 66,046 33,776 30,926 89,429
Legal and accounting services 21,736 19,726 19,726 24,912
Amortization of organization expenses (Note 1D) 2,092 1,441 2,358 2,763
Registration fees -- 61 -- --
Interest expense 77,209 31,399 -- --
Miscellaneous 17,001 10,555 12,422 33,136
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 680,882 $ 288,302 $ 240,127 $ 890,993
- -----------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1I) $ 17,203 $ 4,989 $ 10,100 $ 47,135
- -----------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 17,203 $ 4,989 $ 10,100 $ 47,135
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 663,679 $ 283,313 $ 230,027 $ 843,858
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 6,643,900 $ 3,172,029 $ 3,029,119 $ 9,461,124
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,315,302 $ 483,668 $ 190,273 $ 3,654,332
Financial futures contracts (1,695,039) (670,946) (337,567) (1,810,200)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions $ (379,737) $ (187,278) $ (147,294) $ 1,844,132
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 3,252,208 $ 2,182,137 $ 2,522,070 $ 4,040,488
Financial futures contracts 84,934 -- (99,664) 77,279
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 3,337,142 $ 2,182,137 $ 2,422,406 $ 4,117,767
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 2,957,405 $ 1,994,859 $ 2,275,112 $ 5,961,899
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,601,305 $ 5,166,888 $ 5,304,231 $ 15,423,023
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
92
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets Alabama Portfolio Arkansas Portfolio Georgia Portfolio Kentucky Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 5,801,367 $ 3,707,520 $ 5,659,411 $ 7,114,833
Net realized gain (loss) on investments 36,452 (196,863) 619,588 790,878
Net change in unrealized appreciation
(depreciation) of investments 3,859,164 2,344,431 2,869,835 4,675,966
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,696,983 $ 5,855,088 $ 9,148,834 $ 12,581,677
- -------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,814,194 $ 1,860,201 $ 5,129,603 $ 4,738,142
Withdrawals (20,698,730) (19,132,688) (28,090,665) (27,227,068)
- -------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $(15,884,536) $(17,272,487) $ (22,961,062) $ (22,488,926)
- -------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (6,187,553) $(11,417,399) $ (13,812,228) $ (9,907,249)
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
At beginning of year $108,543,550 $ 74,103,217 $ 108,974,295 $ 133,017,453
- -------------------------------------------------------------------------------------------------------------------------------
At end of year $102,355,997 $ 62,685,818 $ 95,162,067 $ 123,110,204
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
93
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION>
Louisiana Maryland Missouri North Carolina
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 2,044,687 $ 5,868,209 $ 4,530,872 $ 9,890,637
Net realized gain on investments 17,105 583,641 47,598 2,200,237
Net change in unrealized appreciation
(depreciation) of investments 1,149,891 3,765,437 3,709,574 4,378,307
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 3,211,683 $ 10,217,287 $ 8,288,044 $ 16,469,181
- ------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 2,993,205 $ 6,463,344 $ 2,387,301 $ 5,496,793
Withdrawals (6,821,430) (19,867,889) (15,955,992) (41,439,395)
- ------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $(3,828,225) $(13,404,545) $(13,568,691) $ (35,942,602)
- ------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (616,542) $ (3,187,258) $ (5,280,647) $ (19,473,421)
- ------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------
At beginning of year $35,048,671 $110,588,345 $ 85,162,363 $ 187,044,385
- ------------------------------------------------------------------------------------------------------------------------
At end of year $34,432,129 $107,401,087 $ 79,881,716 $ 167,570,964
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
94
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1997
<TABLE>
<CAPTION> Oregon South Carolina Tennessee Virginia
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,643,900 $ 3,172,029 $ 3,029,119 $ 9,461,124
Net realized gain (loss) on investments (379,737) (187,278) (147,294) 1,844,132
Net change in unrealized appreciation
(depreciation) of investments 3,337,142 2,182,137 2,422,406 4,117,767
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,601,305 $ 5,166,888 $ 5,304,231 $ 15,423,023
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,759,540 $ 2,536,482 $ 3,539,000 $ 7,439,212
Withdrawals (31,426,734) (12,051,592) (10,746,904) (38,849,024)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (25,667,194) $ (9,515,110) $ (7,207,904) $ (31,409,812)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (16,065,889) $ (4,348,222) $ (1,903,673) $ (15,986,789)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 129,758,655 $ 58,318,147 $ 56,065,353 $ 177,644,321
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 113,692,766 $ 53,969,925 $ 54,161,680 $ 161,657,532
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
95
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Alabama Arkansas Georgia Kentucky
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 6,332,868 $ 4,255,703 $ 6,613,729 $ 7,720,705
Net realized gain (loss) on investments 1,487,745 286,243 760,070 (1,218,558)
Net change in unrealized appreciation
(depreciation) of investments (1,006,618) (463,593) (233,422) 1,370,567
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 6,813,995 $ 4,078,353 $ 7,140,377 $ 7,872,714
- ----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,435,768 $ 3,573,437 $ 4,580,164 $ 6,532,846
Withdrawals (22,192,266) (15,083,575) (25,694,913) (26,656,733)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $(16,756,498) $ (11,510,138) $(21,114,749) $ (20,123,887)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (9,942,503) $ (7,431,785) $(13,974,372) $ (12,251,173)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $118,486,053 $ 81,535,002 $122,948,667 $145,268,626
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $108,543,550 $ 74,103,217 $108,974,295 $133,017,453
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
96
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Louisiana Maryland Missouri North Carolina
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 2,080,783 $ 6,315,616 $ 5,007,538 $ 10,663,105
Net realized gain (loss) on investments (353,485) 1,533,760 1,101,913 (138,749)
Net change in unrealized appreciation
(depreciation) of investments 290,155 (570,744) (1,026,029) 742,696
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,017,453 $ 7,278,632 $ 5,083,422 $ 11,267,052
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,634,958 $ 9,198,950 $ 4,159,884 $ 19,433,725
Withdrawals (5,912,419) (20,893,413) (17,243,046) (38,835,116)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $ (1,277,461) $ (11,694,463) $(13,083,162) $ (19,401,391)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 739,992 $ (4,415,831) $ (7,999,740) $ (8,134,339)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 34,308,679 $ 115,004,176 $ 93,162,103 $ 195,178,724
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 35,048,671 $ 110,588,345 $ 85,162,363 $ 187,044,385
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
97
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
Oregon South Carolina Tennessee Virginia
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 7,559,303 $ 3,474,069 $ 3,197,243 $ 10,483,462
Net realized gain (loss) on investments (969,132) 659,386 41,366 178,747
Net change in unrealized appreciation
(depreciation) of investments 492,083 (468,193) 360,970 148,870
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 7,082,254 $ 3,665,262 $ 3,599,579 $ 10,811,079
- ------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 5,697,262 $ 5,386,887 $ 4,078,787 $ 9,068,306
Withdrawals (29,411,782) (12,145,670) (10,286,316) (33,982,986)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $(23,714,520) $ (6,758,783) $ (6,207,529) $ (24,914,680)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $(16,632,266) $ (3,093,521) $ (2,607,950) $ (14,103,601)
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
At beginning of year $146,390,921 $ 61,411,668 $ 58,673,303 $ 191,747,922
- ------------------------------------------------------------------------------------------------------------------------------
At end of year $129,758,655 $ 58,318,147 $ 56,065,353 $ 177,644,321
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
98
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Alabama Portfolio
--------------------------------------------------------
Year Ended
--------------------------------------------------------
August 31, Sept. 30,
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 * 1993 **
- --------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of
average daily net assets)+++:
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.50% 0.49% 0.47% 0.44%+ 0.25%+
Net expenses, after
custodian fee reduction 0.49% 0.45% -- -- --
Net investment income 5.47% 5.50% 5.77% 5.37%+ 5.52%+
Portfolio Turnover 23% 52% 51% 26% 10%
- --------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $102,356 $108,544 $ 118,486 $ 117,163 $ 83,628
- --------------------------------------------------------------------------------------------------------------
+++ The operating expenses of the Portfolios may reflect a reduction of the investment adviser fee and/or an
allocation of expenses to the Investment Adviser. Had such actions not been taken, the ratios and net
investment income per share would have been as follows:
Expenses 0.35%+
Net investment income 5.42%+
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Arkansas Portfolio
----------------------------------------------------
Year Ended
----------------------------------------------------
August 31,
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 ***
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios (as a percentage of average daily net assets)+++:
- --------------------------------------------------------------------------------------------------------------
Expenses /(1)/ 0.49% 0.48% 0.46% 0.24%+
Net expenses, after
custodian fee reduction 0.48% 0.46% -- --
Net investment income 5.40% 5.40% 5.69% 5.60%+
Portfolio Turnover 17% 11% 23% 16%
- --------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $62,686 $74,103 $81,535 $82,917
- --------------------------------------------------------------------------------------------------------------
+++ The operating expenses of the Portfolios may reflect a reduction of the investment adviser fee and/or an
allocation of expenses to the Investment Adviser. Had such actions not been taken, the ratios and net
investment income per share would have been as follows:
Expenses 0.43%+
Net investment income 5.41%+
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+++ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
*** For the period from the start of business, February 1, 1994 to August 31,
1994.
/(1)/The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
99
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Georgia Portfolio
-----------------------------------------------------------
Year Ended
-----------------------------------------------------------
August 31, Sept. 30,
---------------------------------------------- ----------
1997 1996 1995 1994 * 1993 **
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios (as a percentage of
average daily net assets):
- ----------------------------------------------------------------------------------------------
Expenses/(1)/ 0.49% 0.50% 0.46% 0.44%+ 0.40%+
Net expenses, after
custodian fee reduction 0.47% 0.45% -- -- --
Net investment income 5.55% 5.59% 5.73% 5.37%+ 5.37%+
Portfolio Turnover 13% 21% 48% 45% 35%
- ----------------------------------------------------------------------------------------------
Net assets, end of year (000s
omitted) $ 95,162 $ 108,974 $122,949 $137,724 $119,311
- ----------------------------------------------------------------------------------------------
<CAPTION>
Kentucky Portfolio
-----------------------------------------------------------
Year Ended
-----------------------------------------------------------
August 31, Sept. 30,
---------------------------------------------- ----------
1997 1996 1995 1994 * 1993 **
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios (as a percentage of
average daily net assets):
- ----------------------------------------------------------------------------------------------
Expenses/(1)/ 0.51% 0.53% 0.49% 0.46%+ 0.40%+
Net expenses, after
custodian fee reduction 0.48% 0.50% -- -- --
Net investment income 5.56% 5.49% 5.75% 5.39%+ 5.40%+
Portfolio Turnover 28% 28% 30% 21% 11%
- ----------------------------------------------------------------------------------------------
Net assets, end of year (000s
omitted) $ 123,110 $ 133,017 $145,269 $145,210 $117,936
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
/(1)/The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
100
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Louisiana Portfolio
--------------------------------------------------
Year Ended
--------------------------------------------------
August 31,
- ----------------------------------------------------------------------------------------------------
1997 1996 1995 1994***
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios (as a percentage of
average daily net assets)+++:
- ----------------------------------------------------------------------------------------------------
Expenses /(1)/ 0.40% 0.30% 0.22% 0.14%+
Net expenses, after
custodian fee reduction 0.38% 0.23% -- --
Net investment income 5.85% 5.90% 6.06% 5.86%+
Portfolio Turnover 27% 99% 46% 21%
- ----------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $34,432 $35,049 $34,309 $31,423
- ----------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Portfolios may reflect a reduction of the
investment adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such actions not been taken, the ratios and net investment
income per share would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses /(1)/ -- 0.41% 0.33% 0.33%+
Expenses after custodian fee reduction -- 0.35% -- --
Net investment income -- 5.79% 5.95% 5.67%+
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Maryland Portfolio
--------------------------------------------------
Year Ended
--------------------------------------------------
August 31, Sept. 30,
- ---------------------------------------------------------------------------------------------------- ------------
1997 1996 1995 1994* 1993**
- ---------------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of
average daily net assets)+++:
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.48% 0.51% 0.47% 0.44%+ 0.36%+
Net expenses, after
custodian fee reduction 0.45% 0.48% -- -- --
Net investment income 5.38% 5.50% 5.79% 5.44%+ 5.41%+
Portfolio Turnover 30% 33% 30% 41% 34%
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $107,401 $110,588 $115,004 $117,856 $94,213
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Portfolios may reflect a reduction of the
investment adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such actions not been taken, the ratios and net investment
income per share would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ -- -- -- -- 0.38%+
Expenses after custodian fee reduction -- -- -- -- --
Net investment income -- -- -- -- 5.39%+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
*** For the period from the start of business, February 1, 1994 to August
31, 1994.
/(1)/ The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for each of
the prior periods have not been adjusted to reflect this change.
See notes to financial statements
101
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Missouri Portfolio
-----------------------------------------------------
Year Ended
-----------------------------------------------------
August 31, Sept. 30,
------------------------------------------- --------
1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of average daily net assets):
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.47% 0.49% 0.48% 0.45%+ 0.40%+
Net expenses, after custodian fee reduction 0.46% 0.47% -- -- --
Net investment income 5.52% 5.52% 5.76% 5.36%+ 5.36%+
Portfolio Turnover 5% 36% 24% 28% 6%
- ------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $79,882 $85,162 $93,162 $95,167 $75,273
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
North Carolina Portfolio
-----------------------------------------------------
Year Ended
-----------------------------------------------------
August 31, Sept. 30,
------------------------------------------- --------
1997 1996 1995 1994* 1993**
- ------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of average daily net assets):
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.52% 0.52% 0.48% 0.46%+ 0.43%+
Net expenses, after custodian fee reduction 0.50% 0.48% -- -- --
Net investment income 5.53% 5.51% 5.78% 5.40%+ 5.43%+
Portfolio Turnover 42% 54% 33% 37% 21%
- ------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $167,571 $187,044 $195,179 $199,772 $172,534
- ------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
/(1)/The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
102
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Oregon Portfolio
---------------------------------------------------------------
Year Ended
---------------------------------------------------------------
August 31, Sept. 30,
-------------------------------------------- -------------
1997 1996 1995 1994* 1993**
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios (as a percentage of
average daily net assets):
- -------------------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.56% 0.50% 0.50% 0.46%+ 0.43%+
Net expenses, after custodian fee reduction 0.55% 0.47% -- -- --
Net investment income 5.46% 5.37% 5.60% 5.26%+ 5.30%+
Portfolio Turnover 22% 28% 22% 15% 32%
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $ 113,693 $ 129,759 $ 146,391 $ 153,119 $ 127,497
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
South Carolina Portfolio
-----------------------------------------------
Year Ended
-----------------------------------------------
August 31,
-----------------------------------------------
1997 1996 1995 1994***
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios (as a percentage of
average daily net assets):
- --------------------------------------------------------------------------------------------------------
Expenses/(1)/ 0.51% 0.53% 0.44% 0.37%+
Net expenses, after custodian fee reduction 0.50% 0.51% -- --
Net investment income 5.59% 5.65% 5.81% 5.47%+
Portfolio Turnover 8% 36% 75% 23%
- --------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $53,970 $58,318 $61,412 $62,265
- --------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
*** For the period from the start of business, February 1, 1994 to August
31, 1994.
/(1)/The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
103
<PAGE>
EV Municipals Portfolios as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Tennessee Portfolio
----------------------------------------------------
Year Ended
----------------------------------------------------
August 31, Sept. 30,
----------------------------------------- ---------
1997 1996 1995 1994* 1993**
- --------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of average daily net assets)+++:
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.43% 0.45% 0.41% 0.36%+ 0.08%+
Net expenses, after custodian fee reduction 0.42% 0.43% -- -- --
Net investment income 5.48% 5.52% 5.81% 5.49%+ 5.60%+
Portfolio Turnover 3% 39% 20% 10% 69%
- --------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $54,162 $56,065 $58,673 $56,496 $39,266
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Virginia Portfolio
----------------------------------------------------
Year Ended
----------------------------------------------------
August 31, Sept. 30,
----------------------------------------- ---------
1997 1996 1995 1994* 1993**
- --------------------------------------------------------------------------------------------------------------
Ratios (as a percentage of average daily net assets)+++:
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses/(1)/ 0.52% 0.51% 0.48% 0.46%+ 0.43%+
Net expenses, after custodian fee reduction 0.49% 0.48% -- -- --
Net investment income 5.53% 5.55% 5.81% 5.49%+ 5.49%+
Portfolio Turnover 25% 30% 38% 48% 29%
- --------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $161,658 $177,644 $191,748 $194,519 $174,260
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+++ The operating expenses of the Portfolios may reflect a reduction of the
investment adviser fee and/or an allocation of expenses to the Investment
Adviser. Had such actions not been taken, the ratios and net investment
income per share would have been as follows:
<TABLE>
<CAPTION>
<S> <C>
Expenses 0.31%+
Net investment income 5.37%+
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven months ended August 31, 1994.
** For the period from the start of business, February 1, 1993 to September
30, 1993.
/(1)/The expense ratios for the reporting periods ended August 31, 1996 and
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Portfolio to
increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for each of the prior
periods have not been adjusted to reflect this change.
See notes to financial statements
104
<PAGE>
EV Municipals Portfolios as of February 28, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
---------------------------------------------------------------------------
Alabama Municipals Portfolio (Alabama Portfolio), Arkansas Municipals
Portfolio (Arkansas Portfolio), Georgia Municipals Portfolio ( Georgia
Portfolio), Kentucky Municipals Portfolio (Kentucky Portfolio), Louisiana
Municipals Portfolio (Louisiana Portfolio), Maryland Municipals Portfolio
(Maryland Portfolio), Missouri Municipals Portfolio (Missouri Portfolio),
North Carolina Municipals Portfolio (North Carolina Portfolio), Oregon
Municipals Portfolio (Oregon Portfolio), South Carolina Municipals
Portfolio (South Carolina Portfolio), Tennessee Municipals Portfolio
(Tennessee Portfolio) and Virginia Municipals Portfolio (Virginia
Portfolio), collectively the Portfolios, are registered under the
Investment Company Act of 1940, as amended, as non-diversified open-end
management investment companies which were organized as trusts under the
laws of the State of New York on May 1, 1992. The Declarations of Trust
permit the Trustees to issue interests in the Portfolios. The following is
a summary of significant accounting policies of the Portfolios. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Municipal bonds are normally valued on the basis
of valuations furnished by a pricing service. Taxable obligations, if any,
for which price quotations are readily available are normally valued at the
mean between the latest bid and asked prices. Futures contracts and options
on financial futures contracts listed on commodity exchanges are valued at
closing settlement prices. Over-the-counter options on financial futures
contracts are normally valued at the mean between the latest bid and asked
prices. Short-term obligations, maturing in sixty days or less, are valued
at amortized cost, which approximates value. Investments for which
valuations or market quotations are unavailable are valued at fair value
using methods determined in good faith by or at the direction of the
Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for Federal
income tax purposes.
C Federal Taxes-- The Portfolios are treated as partnerships for Federal
tax purposes. No provision is made by the Portfolios for federal or state
taxes on any taxable income of the Portfolios because each investor in
the Portfolios is ultimately responsible for the payment of any taxes.
Since some of the Portfolios' investors are regulated investment companies
that invest all or substantially all of their assets in the Portfolios, the
Portfolios normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in order for
their respective investors to satisfy them. The Portfolios will allocate at
least annually among their respective investors each investor's
distributive share of the Portfolios' net taxable (if any) and tax-exempt
investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit. Interest income received by the
Portfolios on investments in municipal bonds, which is excludable from
gross income under the Internal Revenue Code, will retain its status as
income exempt from federal income tax when allocated to each Portfolio's
investors. The portion of such interest, if any, earned on private activity
bonds issued after August 7, 1986, may be considered a tax preference item
for investors.
D Deferred Organization Expenses -- Costs incurred by a Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, a Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by a Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by a Portfolio. A
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, a Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F Options on Financial Futures Contracts -- Upon purchase of a put option
on a financial futures contract by a Portfolio, the premium paid is
recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, a Portfolio will realize a loss in the
amount of the cost of the option. When a Portfolio enters into a closing
sale transaction, the Portfolio will realize a gain or loss depending on
whether the sales
105
<PAGE>
EV Municipals Portfolios as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
proceeds from the closing sale transaction are greater or less than the
cost of the option. When a Portfolio exercises a put option, settlement is
made in cash. The risk associated with purchasing options is limited to the
premium originally paid.
G When-issued and Delayed Delivery Transactions -- The Portfolios may
engage in when-issued and delayed delivery transactions. The Portfolios
record when-issued securities on trade date and maintain security positions
such that sufficient liquid assets will be available to make payments for
the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin earning interest on
settlement date.
H Other -- Investment transactions are accounted for on a trade date basis.
I Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolios. Pursuant to the custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances each Portfolio maintains with IBT. All significant
credit balances used to reduce each Portfolio's custodian fees are reported
as a reduction of expenses in the Statements of Operations.
J 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.
2 Investment Adviser Fee and Other Transactions with Affiliates
---------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
each Portfolio. The fee is based upon a percentage of average daily net
assets plus a percentage of gross income (i.e., income other than gains
from the sale of securities). For the year ended August 31, 1997, the
Portfolios paid advisory fees as follows:
<TABLE>
<CAPTION>
Portfolio Amount Effective Rate*
----------------------------------------------------------------------
<S> <C> <C>
Alabama $ 412,072 0.39%
Arkansas 231,998 0.34%
Georgia 393,961 0.39%
Kentucky 519,193 0.41%
Louisiana 80,898 0.23%
Maryland 423,543 0.39%
Missouri 297,922 0.36%
North Carolina 764,004 0.43%
Oregon 488,080 0.40%
South Carolina 177,252 0.31%
Tennessee 167,958 0.30%
Virginia 726,536 0.42%
</TABLE>
* Advisory fees paid as a percentage of average daily net assets.
Except as to Trustees of the Portfolios who are not members of EVM's or
BMR's organization, officers and Trustees receive remuneration for their
services to the Portfolios out of such investment adviser fee.
Trustees of the Portfolios that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of the Trustees Deferred Compensation
Plan. For the year ended August 31, 1997, no significant amounts have been
deferred.
Certain of the officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations.
106
<PAGE>
EV Municipals Portfolios as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
3 Investments
- --------------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities,
purchased options and short-term obligations, for the year ended August 31,
1997 were as follows:
<TABLE>
Alabama Portfolio
------------------------------------------------------------------------------
<S> <C>
Purchases $24,416,024
Sales 34,728,558
Arkansas Portfolio
------------------------------------------------------------------------------
Purchases $11,407,515
Sales 25,986,335
Georgia Portfolio
------------------------------------------------------------------------------
Purchases $12,989,633
Sales 31,884,027
Kentucky Portfolio
------------------------------------------------------------------------------
Purchases $35,696,541
Sales 48,314,565
Louisiana Portfolio
------------------------------------------------------------------------------
Purchases $ 9,230,358
Sales 11,708,892
Maryland Portfolio
------------------------------------------------------------------------------
Purchases $32,294,082
Sales 40,042,925
Missouri Portfolio
------------------------------------------------------------------------------
Purchases $ 4,207,485
Sales 15,049,440
North Carolina Portfolio
------------------------------------------------------------------------------
Purchases $72,817,726
Sales 96,686,112
Oregon Portfolio
------------------------------------------------------------------------------
Purchases $26,856,486
Sales 42,714,718
South Carolina Portfolio
------------------------------------------------------------------------------
Purchases $ 4,291,750
Sales 9,719,680
Tennessee Portfolio
------------------------------------------------------------------------------
Purchases $ 1,519,740
Sales 7,670,367
Virginia Portfolio
------------------------------------------------------------------------------
Purchases $41,264,863
Sales 61,093,447
</TABLE>
4 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by each Portfolio at August 31, 1997, as computed on a
federal income tax basis, are as follows:
<TABLE>
Alabama Portfolio
------------------------------------------------------------------------------
<S> <C>
Aggregate Cost $ 94,504,048
------------------------------------------------------------------------------
Gross unrealized appreciation $ 6,711,930
Gross unrealized depreciation (25,059)
------------------------------------------------------------------------------
Net unrealized appreciation $ 6,686,871
------------------------------------------------------------------------------
Arkansas Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 58,959,622
------------------------------------------------------------------------------
Gross unrealized appreciation $ 3,436,545
Gross unrealized depreciation (69,269)
------------------------------------------------------------------------------
Net unrealized appreciation $ 3,367,276
------------------------------------------------------------------------------
Georgia Portfolio
------------------------------------------------------------------------------
Aggregate Cost $ 87,597,730
------------------------------------------------------------------------------
Gross unrealized appreciation $ 6,180,106
Gross unrealized depreciation (75,663)
------------------------------------------------------------------------------
Net unrealized appreciation $ 6,104,443
------------------------------------------------------------------------------
Kentucky Portfolio
------------------------------------------------------------------------------
Aggregate Cost $115,387,827
------------------------------------------------------------------------------
Gross unrealized appreciation $ 8,013,161
Gross unrealized depreciation (1,731)
------------------------------------------------------------------------------
Net unrealized appreciation $ 8,011,430
------------------------------------------------------------------------------
</TABLE>
107
<PAGE>
EV Municipals Portfolios as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
Louisiana Portfolio
-----------------------------------------------------------------------------
<S> <C>
Aggregate Cost $ 32,155,616
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 1,864,050
Gross unrealized depreciation (157,943)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 1,706,107
-----------------------------------------------------------------------------
Maryland Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 101,424,067
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 5,135,233
Gross unrealized depreciation (51,202)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 5,084,031
-----------------------------------------------------------------------------
Missouri Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 73,588,023
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 6,006,453
Gross unrealized depreciation (15,235)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 5,991,218
-----------------------------------------------------------------------------
North Carolina Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 153,838,803
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 12,587,277
Gross unrealized depreciation (72,373)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 12,514,904
-----------------------------------------------------------------------------
Oregon Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 108,099,159
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 6,388,800
Gross unrealized depreciation --
-----------------------------------------------------------------------------
Net unrealized appreciation $ 6,388,800
-----------------------------------------------------------------------------
South Carolina Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 50,167,834
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 4,058,055
Gross unrealized depreciation --
-----------------------------------------------------------------------------
Net unrealized appreciation $ 4,058,055
-----------------------------------------------------------------------------
Tennessee Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $ 49,525,469
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 3,303,714
Gross unrealized depreciation (3,340)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 3,300,374
-----------------------------------------------------------------------------
Virginia Portfolio
-----------------------------------------------------------------------------
Aggregate Cost $150,623,953
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 11,658,610
Gross unrealized depreciation (30,068)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 11,628,542
-----------------------------------------------------------------------------
</TABLE>
5 Line of Credit
------------------------------------------------------------------------------
The Portfolios participate 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. Borrowings will be made by the portfolios or funds
solely to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each portfolio or fund based on its
borrowings at the bank's base rate or at an amount above either the bank's
adjusted certificate of deposit rate, Eurodollar rate or federal funds
effective rate. In addition, a fee computed at an annual rate of 0.15% on the
daily unused portion of the facility is allocated among the participating
portfolios and funds at the end of each quarter. At August 31, 1997, the
Alabama Portfolio, Arkansas Portfolio, Kentucky Portfolio, Louisiana
Portfolio, North Carolina Portfolio, South
108
<PAGE>
EV Municipals Portfolios as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
Carolina Portfolio and Virginia Portfolio had balances outstanding pursuant
to this line of credit of $1,030,000, $602,000, $1,171,000, $260,000,
$1,030,000, $1,024,000, and $2,243,000, respectively. The Portfolios did
not have any significant borrowings or allocated fees during the year ended
August 31, 1997.
6 Financial Instruments
---------------------------------------------------------------------------
The Portfolios regularly trade in financial instruments with off-balance
sheet risk in the normal course of their investing activities to assist in
managing exposure to various market risks. These financial instruments
include futures contracts and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment a Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are
considered.
A summary of obligations under these financial instruments at August 31,
1997, is as follows:
<TABLE>
<CAPTION>
Futures Net
Contracts Unrealized
Expiration Appreciation
Portfolio Date Contracts Position (Depreciation)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama 12/97 52 U.S. Treasury Bonds Short $ (27,918)
--------------------------------------------------------------------------------
Arkansas 12/97 54 U.S. Treasury Bonds Short $ 13,196
--------------------------------------------------------------------------------
Georgia 12/97 72 U.S. Treasury Bonds Short $ (38,655)
--------------------------------------------------------------------------------
Kentucky 12/97 67 U.S. Treasury Bonds Short $ (35,971)
--------------------------------------------------------------------------------
Louisiana 12/97 38 U.S. Treasury Bonds Short $ (20,401)
--------------------------------------------------------------------------------
Maryland 12/97 84 U.S. Treasury Bonds Short $ 20,527
--------------------------------------------------------------------------------
Missouri 12/97 60 U.S. Treasury Bonds Short $ (32,313)
--------------------------------------------------------------------------------
North
Carolina 12/97 210 U.S. Treasury Bonds Short $(112,744)
--------------------------------------------------------------------------------
Oregon 12/97 100 U.S. Treasury Bonds Short $ 50,937
--------------------------------------------------------------------------------
Tennessee 12/97 42 U.S. Treasury Bonds Short $ (22,549)
--------------------------------------------------------------------------------
Virginia 12/97 132 U.S. Treasury Bonds Short $ 32,257
--------------------------------------------------------------------------------
</TABLE>
109
<PAGE>
EV Municipals Portfolio as of August 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of:
Alabama Municipals Portfolio
Arkansas Municipals Portfolio
Georgia Municipals Portfolio
Kentucky Municipals Portfolio
Louisiana Municipals Portfolio
Maryland Municipals Portfolio
Missouri Municipals Portfolio
North Carolina Municipals Portfolio
Oregon Municipals Portfolio
South Carolina Municipals Portfolio
Tennessee Municipals Portfolio
Virginia Municipals Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Alabama Municipals Portfolio, Arkansas
Municipals Portfolio, Georgia Municipals Portfolio, Kentucky Municipals
Portfolio, Louisiana Municipals Portfolio, Maryland Municipals Portfolio,
Missouri Municipals Portfolio, North Carolina Municipals Portfolio, Oregon
Municipals Portfolio, South Carolina Municipals Portfolio, Tennessee Municipals
Portfolio and Virginia Municipals Portfolio as of August 31, 1997, the related
statements of operations for the year then ended, the statements of changes in
net assets for the years ended August 31, 1997 and 1996 and supplementary data
for each of the years in the four-year period ended August 31, 1997, and for the
period from the start of business to September 30, 1993 for the Alabama
Municipals Portfolio, Georgia Municipals Portfolio, Kentucky Municipals
Portfolio, Maryland Municipals Portfolio, Missouri Municipals Portfolio, North
Carolina Municipals Portfolio, Oregon Municipals Portfolio, Tennessee Municipals
Portfolio and Virginia Municipals Portfolio. These financial statements and
supplementary data are the responsibility of the Trust's management. Our
responsibility is to express an opinion on the financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1997, by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other audit procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of Alabama Municipals
Portfolio, Arkansas Municipals Portfolio, Georgia Municipals Portfolio, Kentucky
Municipals Portfolio, Louisiana Municipals Portfolio, Maryland Municipals
Portfolio, Missouri Municipals Portfolio, North Carolina Municipals Portfolio,
Oregon Municipals Portfolio, South Carolina Municipals Portfolio, Tennessee
Municipals Portfolio and Virginia Municipals Portfolio at August 31, 1997, the
results of their operations, the changes in their net assets and their
supplementary data for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 10, 1997
110
<PAGE>
EV Marathon Municipals Funds as of August 31, 1997
INVESTMENT MANAGEMENT
EV Marathon Municipals Funds
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
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
Municipals Portfolios
Officers
Thomas J. Fetter
President and Portfolio Manager of South Carolina Municipals Portfolio
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President and Portfolio Manager of Louisiana and North Carolina Municipals
Portfolios
Timothy T. Browse
Vice President and Portfolio Manager of Alabama, Arkansas, Maryland and
Virginia Municipals Portfolios
Cynthia J. Clemson
Vice President and Portfolio Manager of Georgia, Missouri, and Tennessee
Municipals Portfolios
Nicole Anderes
Vice President and Portfolio Manager of Kentucky Municipals Portfolio
Thomas M. Metzold
Vice President and Portfolio Manager of Oregon Municipals Portfolio
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
111
<PAGE>
Portfolio Investment Advisor
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
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
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.
- --------------------------------------------------------------------------------
M-12CSRC-10/97
