<PAGE>
[LOGO OF EATON Investing
VANCE APPEARS HERE]
for the EDUCATION
21st [PHOTO OF BUILDING APPEARS HERE]
Century
Annual Report September 30, 1997
[PHOTO OF
HIGHWAY
APPEARS HERE]
EATON VANCE
MUNICIPALS
TRUST
MARATHON
Global Management -- Global Distribution
[PHOTO OF BRIDGE APPEARS HERE]
California
Florida
Massachusetts
Mississippi
New York
Ohio
Rhode Island
West Virginia
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF THOMAS J.
FETTER APPEARS HERE]
Thomas J. Fetter,
President
The municipal bond market continued to respond favorably in 1997 to an economic
climate of solid growth, yet with low inflation. Gross domestic product (GDP), a
widely-used measure of economic performance, grew 4.9% in the first quarter,
3.3% in the second, and 3.5% in the third. However, inflation remained in the
2-to-3% range due to higher productivity brought on by technology and an
increase in global competition. While the Federal Reserve elected to raise the
Fed Funds Rate -- the primary short-term interest rate benchmark -- 0.25% to
5.5% in March, it has since maintained a 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 9.0% during the year ended September 30,
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 5.25% level at September 30. At that level, municipal
yields represent 82% of 30-year Treasury yields, making them an attractive
option for investors.
Municipal bonds yield 82% of Treasury yields
<TABLE>
<S> <C>
5.25% 8.20%
30-year AAA rated Taxable equivalent yield
General Obligation (GO) Bonds* in 36% tax bracket
6.40%
30 Year Treasury Bond
</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
September 30, 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, Congress and the Clinton Administration agreed
to balance the budget by 2002. This would sharply reduce the government's
borrowing needs, leading to lower interest rates and channeling investments into
more productive areas of the economy. Second, the marginal tax rates of many
taxpayers remain high. For them, municipal bonds may still be the best vehicle
for tax relief. And finally, a balanced investment portfolio features equities,
bonds, and cash. The stock market has shown higher-than-normal volatility this
year, capped by steep price declines in late October. Following three years of
stock market outperformance, we believe investors should consider reallocating a
portion of their portfolios to bonds to maintain a prudent asset allocation. For
these reasons, we believe that the municipal market will continue to attract
tax-conscious investors. Eaton Vance will continue its leadership role in
seeking high, tax-free income.
Sincerely,
/s/ Thomas J. Fetter
Thomas J. Fetter,
President
November 10, 1997
*It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
Effective November 24, 1997, Thomas J. Fetter will be the Portfolio Manager for
the New York Municipals Portfolio, and Robert B. MacIntosh will be the Portfolio
Manager for the Rhode Island Municipals Portfolio. Mr. Fetter and Mr. MacIntosh
are both Vice Presidents of Eaton Vance Management and Boston Management and
Research, and both also manage other Eaton Vance municipal portfolios.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 California Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON APPEARS HERE]
Cynthia J. Clemson
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. 1997 has been another good year for California's economy. Strength
continues in the construction, services and manufacturing sectors, which
had second quarter growth of 7.8%, 4.7%, and 2.1%, respectively.
. The second quarter of 1997 brought improvement in the labor market. In
June, the state unemployment rate stood at 6.2%, the lowest since
September, 1990. Nonfarm employment in the second quarter increased 1.5%
from the first quarter and 3.2% from the second quarter of 1996.
. Computer software, a $120 billion global industry, has been a tremendous
boon to the California economy. California is the nation's leading employer
in this industry, commanding 20% of the estimated 600,000 jobs nationwide.
The motion picture industry has also showed tremendous growth, doubling in
the past ten years to 200,000 jobs.
Management Update
- --------------------------------------------------------------------------------
. In California, we have added yield with some lower rated and non-rated
bonds, which our analysts have scrutinized and found to be sound credits.
On the performance side, we have bought large, high-rated and very liquid
bonds. This "barbell" approach enhances the Fund's performance in varying
market conditions.
. California's economy has improved tremendously over the past several years,
with less exclusive reliance on the defense and high technology sectors,
and a much more diverse base, including services and banking. We traded out
of some GOs, which had appreciated due to the strengthening economy, and
acquired some insured issues, with very little sacrifice in yield.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
10.0%./1/ This return resulted from an increase in net asset value per
share to $10.01 on September 30, 1997 from $9.54 on September 30, 1996, and
the reinvestment of $0.457 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.01
per share, the Fund's distribution rate on September 30, 1997 was 4.50%./3/
The SEC 30-day yield on that date was 4.71%./4/
. To equal 4.50% in a taxable investment, a couple in the 41.95% combined
federal and state tax bracket would need a yield of 7.75%.
Your Investment at Work
- --------------------------------------------------------------------------------
City of Pasadena 1993 Refunding Certificates of Participation -- Pasadena
Civic Improvement Corporation
[PICTURE OF BUILDING APPEARS HERE]
. The income from these certificates is derived from two separate parking
facilities in the City of Pasadena, California. One facility, located at 33
East Green Street, consists of a six-level parking structure with 930
spaces and 9,000 square feet of restaurant and retail space. The other,
located at 39 South Delacey Avenue, is also a six-level structure with 516
spaces and 6,000 square feet of restaurant space.
. The certificates represent a sound credit risk, backed by a predictable
source of income, and they help shore up the performance component of the
Fund.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/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. /5/Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
Performance/5/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 10.0%
Five Years 6.1
Ten Years 7.1
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 5.0%
Five Years 5.8
Ten Years 7.1
</TABLE>
Comparison in Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index*
From September 30, 1987 Through September 30, 1997.
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon California Lehman Brothers Municipal
Date Municipals Fund Bond Index
---- ----------------------- -------------------------
<S> <C> <C>
9/30/87 $10,000 $10,000
10/31/87 $9,809 $10,036
11/30/87 $10,139 $10,297
12/31/87 $10,358 $10,447
1/31/88 $10,836 $10,819
2/28/88 $10,971 $10,933
3/31/88 $10,755 $10,806
4/30/88 $10,785 $10,888
5/31/88 $10,674 $10,857
6/30/88 $10,835 $11,015
7/31/88 $10,865 $11,087
8/31/88 $10,940 $11,097
9/30/88 $11,095 $11,298
10/31/88 $11,288 $11,497
11/30/88 $11,121 $11,392
12/31/88 $11,277 $11,508
1/31/89 $11,495 $11,747
2/28/89 $11,444 $11,612
3/31/89 $11,410 $11,585
4/30/89 $11,634 $11,860
5/31/89 $11,860 $12,106
6/30/89 $11,975 $12,270
7/31/89 $12,129 $12,438
8/31/89 $11,965 $12,316
9/30/89 $11,960 $12,279
10/31/89 $12,052 $12,429
11/30/89 $12,229 $12,647
12/31/89 $12,296 $12,750
1/31/90 $12,167 $12,690
2/28/90 $12,312 $12,803
3/31/90 $12,300 $12,807
4/30/90 $12,134 $12,714
5/31/90 $12,427 $12,992
6/30/90 $12,537 $13,106
7/31/90 $12,749 $13,299
8/31/90 $12,421 $13,106
9/30/90 $12,394 $13,113
10/31/90 $12,604 $13,352
11/30/90 $12,886 $13,620
12/31/90 $12,909 $13,679
1/31/91 $13,084 $13,863
2/28/91 $13,131 $13,984
3/31/91 $13,091 $13,988
4/30/91 $13,272 $14,175
5/31/91 $13,370 $14,301
6/30/91 $13,312 $14,287
7/31/91 $13,474 $14,461
8/31/91 $13,616 $14,652
9/30/91 $13,831 $14,842
10/31/91 $13,956 $14,976
11/30/91 $13,890 $15,018
12/31/91 $14,119 $15,340
1/31/92 $14,050 $15,375
2/28/92 $14,090 $15,380
3/31/92 $14,056 $15,385
4/30/92 $14,186 $15,523
5/31/92 $14,345 $15,706
6/30/92 $14,595 $15,969
7/31/92 $15,018 $16,448
8/31/92 $14,765 $16,287
9/30/92 $14,808 $16,394
10/31/92 $14,397 $16,233
11/30/92 $14,760 $16,524
12/31/92 $14,981 $16,692
1/31/93 $15,166 $16,887
2/28/93 $15,811 $17,497
3/31/93 $15,577 $17,312
4/30/93 $15,747 $17,487
5/31/93 $15,798 $17,585
6/30/93 $16,027 $17,879
7/31/93 $15,994 $17,902
8/31/93 $16,404 $18,275
9/30/93 $16,572 $18,483
10/31/93 $16,568 $18,519
11/30/93 $16,377 $18,355
12/31/93 $16,696 $18,743
1/31/94 $16,876 $18,957
2/28/94 $16,427 $18,466
3/31/94 $15,622 $17,714
4/30/94 $15,656 $17,864
5/31/94 $15,734 $18,019
6/30/94 $15,575 $17,914
7/31/94 $15,850 $18,237
8/31/94 $15,912 $18,300
9/30/94 $15,671 $18,032
10/31/94 $15,311 $17,712
11/30/94 $14,911 $17,391
12/31/94 $15,179 $17,774
1/31/95 $15,722 $18,282
2/28/95 $16,245 $18,814
3/31/95 $16,433 $19,030
4/30/95 $16,403 $19,053
5/31/95 $16,946 $19,661
6/30/95 $16,611 $19,489
7/31/95 $16,703 $19,673
8/31/95 $16,827 $19,923
9/30/95 $16,970 $20,049
10/31/95 $17,331 $20,340
11/30/95 $17,728 $20,678
12/31/95 $17,981 $20,876
1/31/96 $18,036 $21,034
2/28/96 $17,869 $20,892
3/31/96 $17,552 $20,625
4/30/96 $17,460 $20,567
5/31/96 $17,457 $20,559
6/30/96 $17,610 $20,783
7/31/96 $17,809 $20,971
8/31/96 $17,806 $20,966
9/30/96 $18,072 $21,259
10/31/96 $18,218 $21,500
11/30/96 $18,579 $21,893
12/31/96 $18,463 $21,801
1/31/97 $18,537 $21,842
2/28/97 $18,754 $22,046
3/31/97 $18,471 $21,749
4/30/97 $18,658 $21,931
5/31/97 $18,925 $22,261
6/30/97 $19,179 $22,498
7/31/97 $19,801 $23,121
8/31/97 $19,542 $22,905
9/30/97 $19,875 $23,176
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.33% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
3
<PAGE>
EV Marathon Florida Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Florida remains one of the fastest growing states in the nation. Its economy
is buoyed by strong trade and services sectors, with tourism and business
services playing particularly vital roles.
. Job growth has slowed somewhat over the pace set in recent years, but it
remains steady. In the past 12 months, non-agricultural employment growth
has exceeded 2.5%.
. The business services sector has added 250,000 new jobs since 1991, the
worst year of the recession, representing 30% of non-farm growth in this
period.
. State revenues in fiscal 1997 are expected to be $15.6 billion, representing
a 6.3% increase over FY1996. In FY1998, revenues are expected to grow
approximately 5.1%, for an increase of roughly $790 million over FY1997.
Management Update
- --------------------------------------------------------------------------------
. This has been a generally positive year for the bond market, with favorable
returns resulting from a general decline in interest rates. This decline has
occurred in response to a very favorable economic period in which growth has
been neither too fast nor too slow and inflation has remained low.
. During the period, we increased our holdings of high-quality, insured
issues. These tended to perform well in a declining interest rate
environment.
. We continue to maintain diversification in the Portfolio across sectors and
credit quality. In addition, we have combined high-quality insured holdings,
which provide upside performance, with higher-yielding issues, which provide
income and stability in a down market. This "barbell" structure allows the
Fund to perform well in varying market conditions.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
5.9%./1/ This return resulted from an increase in net asset value per share
to $10.90 on September 30, 1997 from $10.78 on September 30, 1996, and the
reinvestment of $0.500 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.90
per share, the Fund's distribution rate on September 30, 1997 was 4.45%./3/
The SEC 30-day yield on that date was 3.95%./4/
. To equal 4.45% in a taxable investment, a couple in the 38.88% combined
federal and state tax bracket would need a yield of 7.28%.
Your Investment at Work
- --------------------------------------------------------------------------------
Escambia County, Florida Housing Finance Authority -- Single Family Mortgage
Revenue Bonds
[PICTURE OF HOUSE APPEARS HERE]
. This bond issue will help provide mortgage loans for home buyers in several
Florida counties, including Escambia, Indian River, and Sarasota. In certain
"targeted areas," borrowers need not be first-time buyers. To be eligible
for financing, all borrowers must be of low- or moderate-income status.
. The bonds, which are rated Aaa by Moody's and AAA by Standard & Poor's, are
backed, in part, by the Government National Mortgage Association ("Ginnie
Mae") and the Federal National Mortgage Association ("Fannie-Mae").
- --------------------------------------------------------------------------------
/1/ This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/ 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. /5/ Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
8/28/90. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
<TABLE>
<CAPTION>
Performance /5/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 5.9%
Five Years 5.7
Life of Fund (8/28/90) 7.3
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 0.9%
Five Years 5.4
Life of Fund (8/28/90) 7.3
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs the Lehman
Brothers Municipal Bond Index*
From August 31, 1990 through September 30, 1997.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Florida Lehman Brothers Municipal
Date Municipals Fund 7-year Bond
Index
---- ----------------------- -------------------------
<S> <C> <C>
8/31/90 $10,000 $10,000
9/30/90 $ 9,990 $10,006
10/31/90 $10,127 $10,187
11/30/90 $10,429 $10,392
12/31/90 $10,482 $10,437
1/31/91 $10,622 $10,577
2/28/91 $10,704 $10,670
3/31/91 $10,698 $10,673
4/30/91 $10,864 $10,816
5/31/91 $10,988 $10,912
6/30/91 $10,899 $10,901
7/31/91 $11,094 $11,034
8/31/91 $11,241 $11,179
9/30/91 $11,434 $11,325
10/31/91 $11,536 $11,427
11/30/91 $11,522 $11,459
12/31/91 $11,886 $11,704
1/31/92 $11,814 $11,731
2/28/92 $11,817 $11,735
3/31/92 $11,784 $11,739
4/30/92 $11,911 $11,844
5/31/92 $12,117 $11,983
6/30/92 $12,360 $12,184
7/31/92 $12,816 $12,550
8/31/92 $12,497 $12,427
9/30/92 $12,510 $12,509
10/31/92 $12,204 $12,386
11/30/92 $12,661 $12,608
12/31/92 $12,843 $12,736
1/31/93 $12,967 $12,884
2/28/93 $13,604 $13,350
3/31/93 $13,352 $13,209
4/30/93 $13,536 $13,342
5/31/93 $13,627 $13,417
6/30/93 $13,870 $13,642
7/31/93 $13,860 $13,659
8/31/93 $14,183 $13,944
9/30/93 $14,368 $14,103
10/31/93 $14,380 $14,130
11/30/93 $14,122 $14,005
12/31/93 $14,494 $14,301
1/31/94 $14,688 $14,464
2/28/94 $14,191 $14,090
3/31/94 $13,423 $13,516
4/30/94 $13,487 $13,360
5/31/94 $13,565 $13,748
6/30/94 $13,446 $13,668
7/31/94 $13,717 $13,915
8/31/94 $13,718 $13,963
9/30/94 $13,457 $13,758
10/31/94 $13,091 $13,514
11/30/94 $12,772 $13,269
12/31/94 $13,187 $13,562
1/31/95 $13,647 $13,949
2/28/95 $14,160 $14,355
3/31/95 $14,267 $14,520
4/30/95 $14,276 $14,537
5/31/95 $14,655 $15,001
6/30/95 $14,389 $14,870
7/31/95 $14,479 $15,011
8/31/95 $14,605 $15,201
9/30/95 $14,789 $15,297
10/31/95 $15,056 $15,519
11/30/95 $15,407 $15,777
12/31/95 $15,619 $15,929
1/31/96 $15,681 $16,049
2/28/96 $15,460 $15,941
3/31/96 $15,209 $15,737
4/30/96 $15,158 $15,692
5/31/96 $15,103 $15,686
6/30/96 $15,254 $15,857
7/31/96 $15,439 $16,001
8/31/96 $15,356 $15,997
9/30/96 $15,592 $16,221
10/31/96 $15,694 $16,404
11/30/96 $15,945 $16,705
12/31/96 $15,862 $16,634
1/31/97 $15,865 $16,666
2/28/97 $15,977 $16,819
3/31/97 $15,722 $16,594
4/30/97 $15,797 $16,733
5/31/97 $15,947 $16,985
6/30/97 $16,162 $17,166
7/31/97 $16,627 $17,642
8/31/97 $16,358 $17,476
9/30/97 $16,511 $17,683
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.34% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
4
<PAGE>
EV Marathon Massachusetts Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF ROBERT B. MACINTOSH APPEARS HERE]
Robert B. MacIntosh,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Massachusetts' economy benefits from diverse sources of strength -- most
notably the high-technology and financial services industries -- which have
produced solid growth, high personal incomes, and low unemployment. The
unemployment rate for September, 1997, was 4.0%, well below the 4.9%
national rate.
. Massachusetts is one of the nation's leaders in several high-technology
businesses, which include software, biotechnology, and the Internet. In the
mutual funds industry, Boston is second only to New York, employing 45,000,
while in biotechnology, Massachusetts is also one of the nation's leading
employers.
. Despite the booming economy, however, Massachusetts has one of the highest
per capita debt levels in the nation. Major projects, such as a new
convention center and the Central Artery/Third Harbor Tunnel Project, could
create financial pressures in the years to come.
Management Discussion
- --------------------------------------------------------------------------------
. The past 12 months has been a good period for the bond market, with a
general decline in yields giving way to price increases. During this period,
we have had the right blend of coupons and call protection to take advantage
of this environment.
. We added some zero coupon bonds to the Fund, which are typically hard to
find. We have also replaced several older bonds having shorter call features
with newer, longer-call bonds. Both of these measures improved the Fund's
structure and added performance upside.
. Our staff of research analysts continues to do an outstanding job for all of
our Funds. In the Massachusetts Portfolio, several credits had ratings
upgrades. This not only helped the Fund's performance, but also speaks well
of our analysts' ability to find value in the market.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.4%./1/ This return resulted from an increase in net asset value per share
to $10.69 on September 30, 1997 from $10.33 on September 30, 1996, and the
reinvestment of $0.486 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.69
per share, the Fund's distribution rate on September 30, 1997 was 4.54%./3/
The SEC 30-day yield on that date was 4.06%./4/
. To equal 4.54% in a taxable investment, a couple in the 43.68% combined
federal and state tax bracket would need a yield of 8.06%.
Your Investment at Work
- --------------------------------------------------------------------------------
Massachusetts Health and Educational Facilities Authority Revenue Bonds --
North Adams Regional Hospital
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
. This bond issue refunded a previous issue, which had financed a major
renovation project at the North Adams Regional Hospital.
. The project included renovating 47,000 square feet in three floors of the
hospital's main building; converting the fourth floor from a
medical/surgical unit to an inpatient psychiatric unit; and constructing a
two-story addition to house outpatient facilities and office space.
. These high-yielding bonds not only give the Fund a solid income stream, but
are also backed by a sound medical institution fulfilling a vital community
need.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/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. /5/Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
4/18/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
<TABLE>
<CAPTION>
Performance/5/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.4%
Five Years 5.7
Life of Fund (4/18/91) 6.9
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.4%
Five Years 5.4
Life of Fund (4/18/91) 6.9
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index*
From April 30, 1991 through September 30, 1997.
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Massachusettes Lehman Brothers Municipal
Date Municipals Fund Bond Index
---- -------------------------- -------------------------
<S> <C> <C>
4/30/91 $10,000 $10,000
5/31/91 $10,040 $10,089
6/30/91 $10,063 $10,079
7/31/91 $10,248 $10,202
8/31/91 $10,410 $10,336
9/30/91 $10,544 $10,471
10/31/91 $10,662 $10,565
11/30/91 $10,669 $10,594
12/31/91 $10,985 $10,822
1/31/92 $11,011 $10,846
2/28/92 $11,025 $10,850
3/31/92 $11,004 $10,854
4/30/92 $11,095 $10,951
5/31/92 $11,250 $11,080
6/30/92 $11,483 $11,265
7/31/92 $11,889 $11,603
8/31/92 $11,657 $11,490
9/30/92 $11,690 $11,565
10/31/92 $11,417 $11,451
11/30/92 $11,744 $11,657
12/31/92 $11,877 $11,776
1/31/93 $12,005 $11,913
2/28/93 $12,487 $12,343
3/31/93 $12,325 $12,213
4/30/93 $12,488 $12,336
5/31/93 $12,562 $12,405
6/30/93 $12,757 $12,613
7/31/93 $12,736 $12,629
8/31/93 $13,020 $12,892
9/30/93 $13,172 $13,039
10/31/93 $13,183 $13,064
11/30/93 $13,031 $12,949
12/31/93 $13,308 $13,222
1/31/94 $13,444 $13,373
2/28/94 $13,115 $13,027
3/31/94 $12,445 $12,496
4/30/94 $12,409 $12,602
5/31/94 $12,519 $12,711
6/30/94 $12,406 $12,637
7/31/94 $12,625 $12,866
8/31/94 $12,675 $12,910
9/30/94 $12,439 $12,721
10/31/94 $12,116 $12,495
11/30/94 $11,736 $12,269
12/31/94 $12,092 $12,539
1/31/95 $12,542 $12,897
2/28/95 $12,940 $13,272
3/31/95 $13,054 $13,425
4/30/95 $13,037 $13,441
5/31/95 $13,384 $13,870
6/30/95 $13,143 $13,748
7/31/95 $13,215 $13,878
8/31/95 $13,387 $14,055
9/30/95 $13,481 $14,143
10/31/95 $13,721 $14,349
11/30/95 $14,000 $14,587
12/31/95 $14,187 $14,727
1/31/96 $14,218 $14,839
2/28/96 $14,046 $14,738
3/31/96 $13,845 $14,550
4/30/96 $13,808 $14,509
5/31/96 $13,823 $14,503
6/30/96 $13,951 $14,661
7/31/96 $14,057 $14,794
8/31/96 $14,031 $14,791
9/30/96 $14,227 $14,997
10/31/96 $14,308 $15,167
11/30/96 $14,560 $15,445
12/31/96 $14,479 $15,380
1/31/97 $14,507 $15,409
2/28/97 $14,627 $15,550
3/31/97 $14,438 $15,343
4/30/97 $14,563 $15,471
5/31/97 $14,761 $15,704
6/30/97 $14,935 $15,871
7/31/97 $15,376 $16,311
8/31/97 $15,220 $16,158
9/30/97 $15,424 $16,350
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 98.76% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
5
<PAGE>
EV Marathon Mississippi Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF CYNTHIA J. CLEMSON APPEARS HERE]
Cynthia J. Clemson,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. As Mississippi's economy has diversified from its traditional manufacturing
base, tourism has emerged as one of the fastest growing sectors. Tourism rev-
enues, which were $3.5 billion in 1994, grew to $4.4 billion in 1996, and $4.6
billion so far in 1997. The state will spend $7.5 million in 1998 to help
continue the positive trend.
. The oil and gas sector continues to play an important role in Mississippi's
economy. Amoco and Shell have joined to construct a $100 million cryogenic
natural gas processing plant designed to deliver 1 billion cubic feet of gas
per day through five interstate pipelines.
. Employment in Mississippi grew to a record 1,286,400 in June of 1997,
according to the state's Employment Security Commission. The June unemployment
rate of 6.1% was up slightly from December's level of 5.4%, but was still well
below the 7.2% recorded in June, 1996.
Management Update
- --------------------------------------------------------------------------------
. Supply of Mississippi municipal bonds has been light this year, which can be
an opportunity for the Fund because it allows us to command a high price for
any issues we need to sell.
. When new issues do come to market, Eaton Vance is usually one of the first
institutions called. This gives us much greater selection than investors who
have to buy in the secondary market.
. Recently we bought some very good industrial development bonds (IDBs) and
hospital bonds, which were issued with attractive yields and long call
features. The companies, including International Paper and Rush Medical
Center, are very strong and should provide a reliable income stream.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.5%./1/ This return resulted from an increase in net asset value per share to
$9.97 on September 30, 1997 from $9.61 on September 30, 1996, and the
reinvestment of $0.434 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.97 per
share, the Fund's distribution rate on September 30, 1997 was 4.27%./3/ The
SEC 30-day yield on that date was 3.87%./4/
. To equal 4.27% in a taxable investment, a couple in the 39.2% combined federal
and state tax bracket would need a yield of 7.02%.
Your Investment at Work
- --------------------------------------------------------------------------------
City of Natchez, Mississippi Combined Water and Sewer System Revenue Bonds
[GRAPHIC OF MAN AND SEWER PIPE APPEARS HERE]
. The proceeds from this bond issue were used to finance the improvement,
repair, and extension of the combined water and sewer system of Natchez,
Mississippi. The system, owned and operated by the city, consists of over 27
miles of sewerage lines and 27 miles of water lines.
. The bonds have good call protection and performance potential and carry
triple-A ratings from both Moody's and Standard & Poor's due to their insured
status through MBIA insurance corporation.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/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. /5/Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
6/11/93. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations. **This figure represents the Fund's performance including
applicable CDSC.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
<TABLE>
<CAPTION>
Performance/5/
- --------------------------------------------------------------------------
Average Annual Total Returns (or net asset value)
- --------------------------------------------------------------------------
<S> <C>
One Year 8.5%
Life of Fund (6/11/93) 4.9
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------
<S> <C>
One Year 3.5%
Life of Fund (6/11/93) 4.5
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index*
From June 30, 1993 through September 30, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Fund's Performance Lehman Brothers
Mississippi Including Applicable Municipal
Date Municipals Fund CDSC** Bond Index
- -------- --------------- --------- ----------------
<S> <C> <C> <C>
6/30/93 $10,000 -- $10,000
7/31/93 $9,950 -- $10,013
8/31/93 $10,249 -- $10,221
9/30/93 $10,385 -- $10,338
10/31/93 $10,369 -- $10,358
11/30/93 $10,244 -- $10,266
12/31/93 $10,522 -- $10,483
1/31/94 $10,644 -- $10,603
2/28/94 $10,295 -- $10,328
3/31/94 $9,640 -- $9,908
4/30/94 $9,717 -- $9,992
5/31/94 $9,816 -- $10,078
6/30/94 $9,733 -- $10,020
7/31/94 $9,925 -- $10,200
8/31/94 $9,919 -- $10,236
9/30/94 $9,741 -- $10,086
10/31/94 $9,500 -- $9,907
11/30/94 $9,254 -- $9,727
12/31/94 $9,477 -- $9,941
1/31/95 $9,835 -- $10,226
2/28/95 $10,214 -- $10,523
3/31/95 $10,296 -- $10,644
4/30/95 $10,274 -- $10,656
5/31/95 $10,577 -- $10,996
6/30/95 $10,408 -- $10,900
7/31/95 $10,474 -- $11,003
8/31/95 $10,593 -- $11,143
9/30/95 $10,658 -- $11,214
10/31/95 $10,857 -- $11,377
11/30/95 $11,103 -- $11,566
12/31/95 $11,235 -- $11,677
1/31/96 $11,290 -- $11,765
2/29/96 $11,150 -- $11,685
3/31/96 $10,950 -- $11,536
4/30/96 $10,913 -- $11,503
5/31/96 $10,932 -- $11,499
6/30/96 $11,047 -- $11,624
7/31/96 $11,145 -- $11,729
8/31/96 $11,141 -- $11,727
9/30/96 $11,315 -- $11,891
10/31/96 $11,402 -- $12,025
11/30/96 $11,588 -- $12,245
12/31/96 $11,537 -- $12,194
1/31/97 $11,616 -- $12,217
2/28/97 $11,736 -- $12,329
3/31/97 $11,583 -- $12,164
4/30/97 $11,661 -- $12,266
5/31/97 $11,825 -- $12,451
6/30/97 $11,956 -- $12,584
7/31/97 $12,279 -- $12,932
8/31/97 $12,177 -- $12,811
9/30/97 $12,271 $12,072 $12,963
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For Federal income tax
purposes, 97.52% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
6
<PAGE>
EV Marathon New York Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF NICOLE ANDERES APPEARS HERE]
Nicole Anderes,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. The tremendous bull market for equity securities has propelled New York's
economy in 1997. The tax revenues generated from capital gains and bonus
payments in the financial services industry contributed significantly to a
projected $1.3 billion cash surplus at the end of fiscal 1997.
. Despite the tax revenue windfall, New York has kept its spending under
control. Spending reductions, especially in the area of Medicaid, contributed
an estimated $290 million to FY1997's cash surplus.
. Job growth for 1997 is expected to be modest. As the state's long-term decline
in manufacturing jobs continues, the services sector should continue to make
up the difference. Overall employment is expected to grow 0.8% in 1997. The
services sector is forecast to grow 2.9% this year after a 2.9% rise in 1996,
while manufacturing is expected to see a 1.1% decline, following a 2.9% drop
in 1996.
Management Update
- --------------------------------------------------------------------------------
. The success of New York City's securities industry and the accompanying
increase in sales and income tax revenues has spilled over to the rest of the
state, giving the overall economy a boost and upgrading the state's GO rating.
As a result, state appropriation bonds have risen in value -- a very positive
development due to their significant weighting in the Fund
. When rates were in the 7% range earlier this year, we took advantage of
opportunities to extend the maturities of the Fund's non-callable holdings,
picking up additional yield in the process. This improved the Fund's overall
call protection and its price appreciation in the subsequent rally.
. New York City water bonds have become very prevalent in the municipal market.
Varying coupon structures provided liquid trading vehicles for making relative
value trades during the second quarter of 1997.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.2%./1/ This return resulted from an increase in net asset value per share to
$11.30 on September 30, 1997 from $10.93 on September 30, 1996, and the
reinvestment of $0.507 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $11.30 per
share, the Fund's distribution rate on September 30, 1997 was 4.49%./3/ The
SEC 30-day yield on that date was 4.22%./4/
. To equal 4.49% in a taxable investment, a couple in the 40.38% combined
federal and state tax bracket would need a yield of 7.53%.
Your Investment at Work
- --------------------------------------------------------------------------------
New York Municipal Water Finance Authority Revenue Bonds
[GRAPHIC OF MAN AND SEWER PIPE APPEARS HERE]
. This entity, which manages New York City's enormous water supply and sewage
treatment needs, has significant ongoing financial needs for its large capital
spending projects. As such, its numerous, frequently-traded bonds can be used
as a vehicle for short-term, relative value trading profits.
. Over the long term, management knows this credit well and is comfortable with
it, especially given the essential nature of water and sewer services to the
city's residents. This issue was also a good value compared to bonds having
similar credit ratings.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable contingent deferred sales charge
(CDSC). /2/ Aportion of the Fund's income may be subject to Federal and state
income taxes and/or federal alternative minimum tax. /3/ The Fund's distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/ 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. /5/ Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
8/30/90. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
<TABLE>
<CAPTION>
Performance/5/
- --------------------------------------------------------------------------------
<S> <C>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 8.2%
Five Years 6.2
Life of Fund (8/30/90) 7.9
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.2%
Five Years 5.9
Life of Fund (8/30/90) 7.9
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs the Lehman
Brothers Municipal Bond Index*
From August 31, 1990 through September 30, 1997.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
New York Municipal
Date Municipals Fund Bond Index
- -------- ------------------- -------------------
<S> <C> <C>
8/31/90 $10,000 $10,000
9/30/90 $9,950 $10,006
10/31/90 $10,075 $10,187
11/30/90 $10,337 $10,392
12/31/90 $10,369 $10,437
1/31/91 $10,519 $10,577
2/28/91 $10,560 $10,670
3/31/91 $10,605 $10,673
4/30/91 $10,792 $10,816
5/31/91 $10,863 $10,912
6/30/91 $10,837 $10,901
7/31/91 $11,073 $11,034
8/31/91 $11,274 $11,179
9/30/91 $11,500 $11,325
10/31/91 $11,634 $11,427
11/30/91 $11,611 $11,459
12/31/91 $11,883 $11,704
1/31/92 $11,682 $11,731
2/28/92 $11,742 $11,735
3/31/92 $11,777 $11,739
4/30/92 $11,951 $11,844
5/31/92 $12,148 $11,983
6/30/92 $12,450 $12,184
7/31/92 $12,978 $12,550
8/31/92 $12,683 $12,427
9/30/92 $12,697 $12,509
10/31/92 $12,392 $12,386
11/30/92 $12,805 $12,608
12/31/92 $12,977 $12,736
1/31/93 $13,149 $12,884
2/28/93 $13,762 $13,350
3/31/93 $13,559 $13,209
4/30/93 $13,720 $13,342
5/31/93 $13,836 $13,417
6/30/93 $14,066 $13,642
7/31/93 $14,069 $13,659
8/31/93 $14,381 $13,944
9/30/93 $14,542 $14,103
10/31/93 $14,556 $14,130
11/30/93 $14,363 $14,005
12/31/93 $14,732 $14,301
1/31/94 $14,866 $14,464
2/28/94 $14,420 $14,090
3/31/94 $13,678 $13,516
4/30/94 $13,732 $13,630
5/31/94 $13,877 $13,748
6/30/94 $13,721 $13,668
7/31/94 $13,968 $13,915
8/31/94 $14,036 $13,963
9/30/94 $13,725 $13,758
10/31/94 $13,360 $13,514
11/30/94 $12,897 $13,269
12/31/94 $13,354 $13,562
1/31/95 $13,805 $13,949
2/28/95 $14,294 $14,355
3/31/95 $14,444 $14,520
4/30/95 $14,441 $14,537
5/31/95 $14,864 $15,001
6/30/95 $14,613 $14,870
7/31/95 $14,732 $15,011
8/31/95 $14,916 $15,201
9/30/95 $14,991 $15,297
10/31/95 $15,275 $15,519
11/30/95 $15,586 $15,777
12/31/95 $15,744 $15,929
1/31/96 $15,808 $16,049
2/28/96 $15,630 $15,941
3/31/96 $15,393 $15,737
4/30/96 $15,372 $15,692
5/31/96 $15,361 $15,686
6/30/96 $15,528 $15,857
7/31/96 $15,657 $16,001
8/31/96 $15,617 $15,997
9/30/96 $15,870 $16,221
10/31/96 $15,973 $16,404
11/30/96 $16,241 $16,705
12/31/96 $16,158 $16,634
1/31/97 $16,147 $16,666
2/28/97 $16,334 $16,819
3/31/97 $16,138 $16,594
4/30/97 $16,272 $16,733
5/31/97 $16,529 $16,985
6/30/97 $16,684 $17,166
7/31/97 $17,212 $17,642
8/31/97 $17,005 $17,476
9/30/97 $17,176 $17,683
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 98.50% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
7
<PAGE>
EV Marathon Ohio Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF THOMAS J. FETTER APPEARS HERE]
Thomas J. Fetter,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Ohio's economy remains dependent on the manufacturing sector, which accounts
for over 20% of total employment. This sector has experienced growth over the
past few years, aided by positive growth trends in the national economy.
Growth in the service sector continues to help balance the state's overall
economy.
. Total employment in Ohio has increased over the past year, reaching 5.49
million in July, 1997 -- an increase of 122,000 over July, 1996. Unemployment
remained steady at 4.2% in July, 1997 unchanged from June -- and was below the
4.8% national rate reported for that month.
. The outlook for the state's economy is positive. According to a survey of Ohio
business executives conducted by Bank of America, nearly 70% were optimistic
about the economy for the next six months, with 62% expecting to maintain
their current work force through the end of the year. Many were concerned
about rising labor costs, however.
Management Update
- --------------------------------------------------------------------------------
. During the period, we increased the number of non-rated holdings. Our research
staff is particularly adept at finding high-yielding issues which are backed
by sound municipal issuers. This added tremendous value to the Fund and helped
boost its distribution rate.
. With a combination of yield, or high-coupon bonds on the one hand, and high-
quality, discounted "performance" bonds on the other, the Fund has a "barbell"
structure which provides both income and total return. This portfolio mix
performed well in a generally declining interest rate environment. Duration
was kept in a targeted range to help reduce volatility.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.0%./1/ This return resulted from an increase in net asset value per share to
$10.93 on September 30, 1997 from $10.59 on September 30, 1996, and the
reinvestment of $0.485 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $10.93 per
share, the Fund's distribution rate on September 30, 1997 was 4.53%./3/ The
SEC 30-day yield on that date was 4.18%./4/
. To equal 4.53% in a taxable investment, a couple in the 40.8% combined federal
and state tax bracket would need a yield of 7.65%.
Your Investment at Work
- --------------------------------------------------------------------------------
City of Middleburg Heights Hospital Improvement Refunding Revenue Bonds --
Southwest General Health Center
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
. The proceeds from this bond issue were used to refinance a previous issue,
which had funded a major project undertaken in 1995. That project included
expanding the Hospital's surgical facilities; acquiring new medical equipment;
and renovating several facilities, including the outpatient center,
labor/delivery rooms, and nursery.
. The bonds exemplify the Fund's high-quality holdings, with triple-A ratings
from both Moody's and Standard & Poor's and FSA insurance.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable contingent deferred sales charge
(CDSC). /2/ Aportion of the Fund's income may be subject to federal and state
income taxes and/or federal alternative minimum tax. /3/ The Fund's distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/ 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. /5/ Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
4/18/91. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
<TABLE>
<CAPTION>
Performance/5/
- --------------------------------------------------------------------------------
<S> <C>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 8.0%
Five Years 6.1
Life of Fund (4/18/91) 7.1
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.0%
Five Years 5.8
Life of Fund (4/18/91) 7.1
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs the Lehman
Brothers Municipal Bond Index*
From April 30, 1991 through September 30, 1997.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
Ohio Municipal
Date Municipals Fund Bond Index
- -------- ------------------- --------------------
<S> <C> <C>
4/30/91 $10,000 $10,000
5/31/91 $10,030 $10,089
6/30/91 $10,007 $10,079
7/31/91 $10,200 $10,202
8/31/91 $10,337 $10,336
9/30/91 $10,488 $10,471
10/31/91 $10,592 $10,565
11/30/91 $10,597 $10,594
12/31/91 $10,872 $10,822
1/31/92 $10,875 $10,846
2/28/92 $10,886 $10,850
3/31/92 $10,852 $10,854
4/30/92 $10,940 $10,951
5/31/92 $11,103 $11,080
6/30/92 $11,312 $11,265
7/31/92 $11,716 $11,603
8/31/92 $11,506 $11,490
9/30/92 $11,550 $11,565
10/31/92 $11,266 $11,451
11/30/92 $11,625 $11,657
12/31/92 $11,773 $11,776
1/31/93 $11,910 $11,913
2/28/93 $12,388 $12,343
3/31/93 $12,214 $12,213
4/30/93 $12,363 $12,336
5/31/93 $12,469 $12,405
6/30/93 $12,684 $12,613
7/31/93 $12,672 $12,629
8/31/93 $12,976 $12,892
9/30/93 $13,137 $13,039
10/31/93 $13,147 $13,064
11/30/93 $12,984 $12,949
12/31/93 $13,294 $13,222
1/31/94 $13,440 $13,373
2/28/94 $13,042 $13,027
3/31/94 $12,327 $12,496
4/30/94 $12,385 $12,602
5/31/94 $12,517 $12,711
6/30/94 $12,402 $12,637
7/31/94 $12,655 $12,866
8/31/94 $12,678 $12,910
9/30/94 $12,429 $12,721
10/31/94 $12,082 $12,495
11/30/94 $11,741 $12,269
12/31/94 $12,104 $12,539
1/31/95 $12,560 $12,897
2/28/95 $12,990 $13,272
3/31/95 $13,089 $13,425
4/30/95 $13,082 $13,441
5/31/95 $13,487 $13,870
6/30/95 $13,298 $13,748
7/31/95 $13,380 $13,878
8/31/95 $13,548 $14,055
9/30/95 $13,639 $14,143
10/31/95 $13,874 $14,349
11/30/95 $14,122 $14,587
12/31/95 $14,267 $14,727
1/31/96 $14,321 $14,839
2/28/96 $14,163 $14,738
3/31/96 $13,990 $14,550
4/30/96 $13,978 $14,509
5/31/96 $13,978 $14,503
6/30/96 $14,117 $14,661
7/31/96 $14,275 $14,794
8/31/96 $14,195 $14,791
9/30/96 $14,387 $14,997
10/31/96 $14,521 $15,167
11/30/96 $14,741 $15,445
12/31/96 $14,675 $15,380
1/31/97 $14,688 $15,409
2/28/97 $14,819 $15,550
3/31/97 $14,661 $15,343
4/30/97 $14,770 $15,471
5/31/97 $14,979 $15,704
6/30/97 $15,094 $15,871
7/31/97 $15,501 $16,311
8/31/97 $15,391 $16,158
9/30/97 $15,536 $16,350
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.79% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
8
<PAGE>
EV Marathon Rhode Island Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PHOTO OF NICOLE ANDERES APPEARS HERE]
Nicole Anderes,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Rhode Island's diversification away from the manufacturing sector began in the
mid-1980s and has continued to reshape its economy. Services, the fastest-
growing sector now accounting for over 30% of all jobs, added 2,800 jobs in
the last 12 months, while the manufacturing sector lost 1,200.
. The August, 1997, unemployment rate of 4.9% was unchanged from a year earlier.
The U.S. rate was also 4.9% in August, 1997. Total state employment increased
to 481,700 by August -- the highest it has been since September, 1990.
. Financial services and health care have been major contributors to growth in
the service sector, accounting for half of all job growth in the 12 months
ending August 31, 1997.
. Despite its decline, manufacturing remains an important part of the state
economy, accounting for over 20% of all employment. The jewelry industry --
which employs over 35,000 -- is a key contributor.
Management Update
- --------------------------------------------------------------------------------
. We continued to maintain diversification across sectors and credit quality as
we sought to combine high-quality insured holdings, which provided upside
performance, with higher-yielding issues, which provided income and stability
in a down market. In addition, we have continued to maintain and improve the
Fund's call protection, which helped insulate it during periods of market
volatility.
. With the large number of insured holdings in the Rhode Island municipal
market, we continued to seek non-insured bonds to add yield. Our research
staff has been successful in locating sound opportunities -- primarily in the
health care sector -- in the past year.
. As the Fund's duration lengthened during the past year, we used modest hedging
techniques to bring it down to a more neutral level.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.2%./1/ This return resulted from an increase in net asset value per share to
$9.84 on September 30, 1997 from $9.51 on September 30, 1996, and the
reinvestment of $0.430 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.84 per
share, the Fund's distribution rate on September 30, 1997 was 4.34%./3/ The
SEC 30-day yield on that date was 4.32%./4/
. To equal 4.34% in a taxable investment, a couple in the 42.34% combined
federal and state tax bracket would need a yield of 7.53%.
Your Investment at Work
- --------------------------------------------------------------------------------
Rhode Island Health and Educational Building Corp. -- Steere House
[GRAPHIC OF MEDICAL SYMBOL APPEARS HERE]
. The proceeds from this bond issue were used to refinance a previous issue and
to fund renovations to the Alzheimer's special care unit at The Steer House, a
120-bed elderly care facility affiliated with Rhode Island Hospital.
. The previous issue, refunded by these proceeds, had been owned by Eaton Vance
for a few years, so management was familiar and comfortable with the credit.
Because most Rhode Island new issues are insured holdings offering low yield,
this issue represented a good opportunity to add yield to the Fund, thereby
helping the distribution rate for shareholders.
- --------------------------------------------------------------------------------
/1/This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the net asset
value. /4/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. /5/Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
6/11/93. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations. **This figure represents the Fund's performance including
applicable CDSC.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
Performance/5/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.2%
Life of Fund (6/11/93) 4.7
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.2%
Life of Fund (6/11/93) 4.3
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index.*
From June 30, 1993 through September 30, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Fund's Performance Lehman Brothers
Rhode Island (including Municipal
Date Municipals Fund applicable CDSC)** Bond Index
---- --------------- ------------------ ----------
<S> <C> <C> <C>
6/30/93 $10,000 -- $10,000
7/31/93 $ 9,970 -- $10,013
8/31/93 $10,328 -- $10,221
9/30/93 $10,453 -- $10,338
10/31/93 $10,406 -- $10,358
11/30/93 $10,259 -- $10,266
12/31/93 $10,587 -- $10,483
1/31/94 $10,729 -- $10,603
2/28/94 $10,297 -- $10,328
3/31/94 $ 9,643 -- $ 9,908
4/30/94 $ 9,711 -- $ 9,992
5/31/94 $ 9,832 -- $10,078
6/30/94 $ 9,740 -- $10,020
7/31/94 $ 9,944 -- $10,200
8/31/94 $ 9,961 -- $10,236
9/30/94 $ 9,731 -- $10,086
10/31/94 $ 9,458 -- $ 9,907
11/30/94 $ 9,202 -- $ 9,727
12/31/94 $ 9,503 -- $ 9,941
1/31/95 $ 9,885 -- $10,226
2/28/95 $10,200 -- $10,523
3/31/95 $10,305 -- $10,644
4/30/95 $10,274 -- $10,656
5/31/95 $10,513 -- $10,996
6/30/95 $10,290 -- $10,900
7/31/95 $10,380 -- $11,003
8/31/95 $10,523 -- $11,143
9/30/95 $10,600 -- $11,214
10/31/95 $10,802 -- $11,377
11/30/95 $10,993 -- $11,566
12/31/95 $11,116 -- $11,677
1/31/96 $11,184 -- $11,765
2/28/96 $11,045 -- $11,685
3/31/96 $10,881 -- $11,536
4/30/96 $10,880 -- $11,503
5/31/96 $10,900 -- $11,499
6/30/96 $11,005 -- $11,624
7/31/96 $11,104 -- $11,729
8/31/96 $11,077 -- $11,727
9/30/96 $11,252 -- $11,891
10/31/96 $11,341 -- $12,025
11/30/96 $11,540 -- $12,245
12/31/96 $11,490 -- $12,194
1/31/97 $11,449 -- $12,217
2/28/97 $11,557 -- $12,329
3/31/97 $11,426 -- $12,164
4/30/97 $11,540 -- $12,266
5/31/97 $11,716 -- $12,451
6/30/97 $11,834 -- $12,584
7/31/97 $12,183 -- $12,932
8/31/97 $12,055 -- $12,811
9/30/97 $12,174 $11,977 $12,963
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
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 September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
9
<PAGE>
EV Marathon West Virginia Municipals Fund as of September 30, 1997
INVESTMENT UPDATE
[PICTURE TIMOTHY T. BROWSE, APPEARS HERE]
Timothy T. Browse,
Portfolio Manager
The Economy
- --------------------------------------------------------------------------------
. Nearly all areas of West Virginia's economy showed growth during the past 12
months. Total employment increased by 9,100 jobs, with the largest gains in
services (up 5,600), trade (up 2,400), construction (up 1,600) and government
(up 1,300).
. The largest job decline was in mining, where employment dropped by 1,300
during the 12-month period. The unemployment rate dropped to 6.3% in August,
1997, from 6.9% a year earlier.
. A bright spot within the state's manufacturing sector was the wood products
industry, which had the fastest growth of any industry in this sector since
the 1980s. Wood products -- including furniture, cabinets, millwork, pallets,
containers, plywood, and prefabricated buildings -- provide over 16,500 jobs
and generate almost $2 billion in annual revenue.
Management Update
- --------------------------------------------------------------------------------
. This has been a positive year for the bond market, with favorable returns
overall resulting from a general downward trend in interest rates. 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.
. We seek to maintain a balanced portfolio of high-coupon, defensive bonds and
low-coupon, performance bonds. With interest rates continually moving, we
make minor adjustments on an ongoing basis to maintain the right mix. The
goal of this strategy is to provide the optimum performance in any given
market condition. As interest rates have fallen in the last year, we have
added to our low-coupon, or discount, holdings to maintain the right balance
in the Fund.
The Fund
- --------------------------------------------------------------------------------
. During the year ended September 30, 1997, the Fund had a total return of
8.2%./1/ This return resulted from an increase in net asset value per share
to $9.97 on September 30, 1997 from $9.62 on September 30, 1996, and the
reinvestment of $0.419 per share in tax-free dividend income./2/
. Based on the Fund's most recent dividend, and a net asset value of $9.97 per
share, the Fund's distribution rate on September 30, 1997 was 4.17%./3/ The
SEC 30-day yield on that date was 4.01%./4/
. To equal 4.17% in a taxable investment, a couple in the 40.16% combined
federal and state tax bracket would need a yield of 6.97%.
Your Investment at Work
- --------------------------------------------------------------------------------
School Building Authority of West Virginia Capital Improvement Refunding
Revenue Bonds, Series 1997
[PICTURE OF GRADUATION CAP APPEARS HERE]
. This Authority was created in 1989 to provide funding for elementary and
secondary public schools and to help consolidate school systems to more
effectively utilize the state's educational resources. Through 1996, over
$490 million in grants had been made; this bond issue provided another $130
million.
. A good example of the use of bond proceeds is the Computer Plan. Through this
state program, West Virginia has spent $62.8 million to install computers in
all elementary schools statewide and has trained over 13,000 educators in
computer science.
- --------------------------------------------------------------------------------
/1/ This return does not include the applicable 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 distribution
rate represents actual distributions paid to shareholders and is calculated
daily by dividing the last distribution per share (annualized) by the offering
price. /4/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. /5/Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns reflect applicable CDSC based on the following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
*Source: Towers Data Systems, Bethesda, MD. Investment operations commenced on
6/11/93. Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the Fund's
investment operations. **This figure represents the Fund's performance including
applicable CDSC.
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.
- --------------------------------------------------------------------------------
Fund Information
as of September 30, 1997
Performance/5/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One Year 8.2%
Life of Fund (6/11/93) 4.8
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One Year 3.2%
Life of Fund (6/11/93) 4.4
</TABLE>
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the Lehman
Brothers Municipal Bond Index.*
From June 30, 1993 through September 30, 1997
<TABLE> Fund's
<CAPTION> Performance
EV Marathon (including Lehman Brothers
West Virginia applicable Municipal
Date Municipals Fund CDSC)** Bond Index
<S> <C> <C> <C>
6/30/93 $10,000 -- $10,000
7/31/93 $9,910 -- $10,013
8/31/93 $10,201 -- $10,221
9/30/93 $10,347 -- $10,338
10/31/93 $10,321 -- $10,358
11/30/93 $10,184 -- $10,266
12/31/93 $10,483 -- $10,483
1/31/94 $10,614 -- $10,603
2/28/94 $10,294 -- $10,328
3/31/94 $9,691 -- $9,908
4/30/94 $9,726 -- $9,992
5/31/94 $9,835 -- $10,078
6/30/94 $9,710 -- $10,020
7/31/94 $9,934 -- $10,200
8/31/94 $9,949 -- $10,236
9/30/94 $9,761 -- $10,086
10/31/94 $9,519 -- $9,907
11/30/94 $9,231 -- $9,727
12/31/94 $9,508 -- $9,941
1/31/95 $9,844 -- $10,226
2/28/95 $10,212 -- $10,523
3/31/95 $10,304 -- $10,644
4/30/95 $10,305 -- $10,656
5/31/95 $10,607 -- $10,996
6/30/95 $10,417 -- $10,900
7/31/95 $10,483 -- $11,003
8/31/95 $10,624 -- $11,143
9/30/95 $10,678 -- $11,214
10/31/95 $10,889 -- $11,377
11/30/95 $11,101 -- $11,566
12/31/95 $11,257 -- $11,677
1/31/96 $11,301 -- $11,765
2/28/96 $11,172 -- $11,685
3/31/96 $11,985 -- $11,536
4/30/96 $10,948 -- $11,503
5/31/96 $10,956 -- $11,499
6/30/96 $11,047 -- $11,624
7/31/96 $11,154 -- $11,729
8/31/96 $11,137 -- $11,727
9/30/96 $11,321 -- $11,891
10/31/96 $11,419 -- $12,025
11/30/96 $11,615 -- $12,245
12/31/96 $11,563 -- $12,194
1/31/97 $11,557 -- $12,217
2/28/97 $11,663 -- $12,329
3/31/97 $11,508 -- $12,164
4/30/97 $11,621 -- $12,266
5/31/97 $11,783 -- $12,451
6/30/97 $11,888 -- $12,584
7/31/97 $12,221 -- $12,932
8/31/97 $12,118 -- $12,811
9/30/97 $12,247 $12,048 $12,963
</TABLE>
The chart compares the Fund's total return with that of the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged market index. Returns are
calculated by determining the percentage change in net asset value (NAV) with
all distributions reinvested. The lines on the chart represent total returns of
$10,000 hypothetical investments in the Fund and the Index. The Index's total
return does not reflect commissions or expenses that would have been incurred if
an investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index.
- --------------------------------------------------------------------------------
Federal income tax information on distributions: For federal income tax
purposes, 99.89% of the total dividends paid by the Fund from net investment
income during the year ended September 30, 1997 is designated as an exempt-
interest dividend.
- --------------------------------------------------------------------------------
10
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
California Fund Florida Fund Massachusetts Fund Mississippi Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio --
Identified cost $286,016,649 $ 474,270,117 $ 218,416,982 $ 19,121,699
Unrealized appreciation 36,296,732 31,792,701 22,358,896 1,865,814
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio, at value (Note 1A) $322,313,381 $ 506,062,818 $ 240,775,878 $ 20,987,513
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 2,897 $ 175,859 $ 51,109 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $322,316,278 $ 506,238,677 $ 240,826,987 $ 20,987,513
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 595,098 $ 924,949 $ 448,913 $ 37,128
Payable for Fund shares redeemed 301,252 910,150 376,319 --
Payable to affiliate for Trustees' fees (Note 4) 831 831 831 42
Accrued expenses 261,751 345,574 162,738 26,281
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,158,932 $ 2,181,504 $ 988,801 $ 63,451
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $321,157,346 $ 504,057,173 $ 239,838,186 $ 20,924,062
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $313,385,607 $ 489,224,049 $ 233,510,216 $ 20,938,698
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (27,929,895) (16,034,629) (15,605,424) (1,942,663)
Accumulated undistributed (distributions in
excess of) net investment income (loss) (595,098) (924,948) (425,502) 62,213
Net unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 36,296,732 31,792,701 22,358,896 1,865,814
- ------------------------------------------------------------------------------------------------------------------------------------
Total $321,157,346 $ 504,057,173 $ 239,838,186 $ 20,924,062
- ------------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
32,074,100 46,250,532 22,438,467 2,097,673
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest outstanding) $ 10.01 $ 10.90 $ 10.69 $ 9.97
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
11
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
New York Fund Ohio Fund Rhode Island Fund West Virginia Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Municipals Portfolio --
Identified cost $476,860,994 $251,266,361 $ 36,447,137 $ 29,736,230
Unrealized appreciation 42,091,344 16,867,344 1,911,478 1,867,695
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment in Portfolio , at value (Note 1A) $518,952,338 $268,133,705 $ 38,358,615 $ 31,603,925
- -----------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold $ 312,172 $ 76,076 $ 23,940 $ 13,925
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $519,264,510 $268,209,781 $ 38,382,555 $ 31,617,850
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions payable $ 957,309 $ 498,703 $ 68,019 $ 54,213
Payable for Fund shares redeemed 562,327 525,256 46,710 5,156
Payable to affiliate for Trustees' fees (Note 4) 831 831 42 42
Accrued expenses 350,899 184,082 33,926 34,167
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,871,366 $ 1,208,872 $ 148,697 $ 93,578
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets $517,393,144 $267,000,909 $ 38,233,858 $ 31,524,272
- -----------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $485,910,720 $251,920,705 $ 38,031,727 $ 31,398,765
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (9,651,623) (2,156,455) (1,644,792) (1,687,975)
Accumulated undistributed (distributions in excess of)
net investment income (loss) (957,297) 369,315 (64,555) (54,213)
Net unrealized appreciation of investments from
Portfolio
(computed on the basis of identified cost) 42,091,344 16,867,344 1,911,478 1,867,695
- -----------------------------------------------------------------------------------------------------------------------------------
Total $517,393,144 $267,000,909 $ 38,233,858 $ 31,524,272
- -----------------------------------------------------------------------------------------------------------------------------------
Shares of Beneficial Interest Outstanding
- -----------------------------------------------------------------------------------------------------------------------------------
45,795,278 24,419,523 3,885,680 3,162,569
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- -----------------------------------------------------------------------------------------------------------------------------------
(Net assets / shares of beneficial interest
outstanding) $ 11.30 $ 10.93 $ 9.84 $ 9.97
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
12
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
California Fund Florida Fund Massachusetts Fund Mississippi Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $21,427,517 $33,625,679 $15,874,318 $1,353,828
Expenses allocated from Portfolio (1,883,108) (2,690,501) (1,324,088) (83,641)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $19,544,409 $30,935,178 $14,550,230 $1,270,187
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,292 $ 3,424 $ 3,292 $ 296
Custodian fee (Note 1G) 25,562 313 21,734 3,892
Distribution fees (Note 5) 3,346,237 5,254,197 2,373,775 211,238
Transfer and dividend disbursing agent fees 275,887 379,217 155,913 17,602
Printing and postage 72,131 124,837 62,883 12,239
Legal and accounting services 25,384 25,722 24,363 23,418
Registration fees 3,721 9,121 2,837 200
Amortization of organization expenses (Note 1D) -- -- -- 4,253
Miscellaneous 40,518 51,273 45,453 3,428
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 3,792,732 $ 5,848,104 $ 2,690,250 $ 276,566
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $15,751,677 $25,087,074 $11,859,980 $ 993,621
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 8,175,275 $16,420,493 $ 4,857,273 $ 358,329
Financial futures contracts (2,919,511) (8,713,173) (2,756,532) (193,790)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments $ 5,255,764 $ 7,707,320 $ 2,100,741 $ 164,539
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $11,059,218 $(2,769,944) $ 6,261,032 $ 693,308
Financial futures contracts 14,355 1,396,898 73,184 1,044
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $11,073,573 $(1,373,046) $ 6,334,216 $ 694,352
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $16,329,337 $ 6,334,274 $ 8,434,957 $ 858,891
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $32,081,014 $31,421,348 $20,294,937 $1,852,512
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
New York Fund Ohio Fund Rhode Island Fund West Virginia Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income allocated from Portfolio $34,198,970 $17,429,049 $2,213,339 $2,053,861
Expenses allocated from Portfolio (3,155,241) (1,545,061) (86,449) (127,338)
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income from Portfolio $31,043,729 $15,883,988 $2,126,890 $1,926,523
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,292 $ 3,292 $ 165 $ 165
Custodian fee (Note 1G) 25,626 23,007 5,063 5,026
Distribution fees (Note 5) 5,205,762 2,606,482 356,624 325,701
Transfer and dividend disbursing agent fees 390,671 210,796 30,640 26,965
Printing and postage 141,860 67,666 13,771 15,916
Legal and accounting services 29,606 24,413 19,866 17,990
Registration fees 4,011 2,555 -- 50
Amortization of organization expenses (Note 1D) -- -- 2,474 3,321
Miscellaneous 52,581 31,521 4,713 9,901
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 5,853,409 $ 2,969,732 $ 433,316 $ 405,035
- -----------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1G) $ -- $ -- $ 2,352 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ -- $ -- $ 2,352 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 5,853,409 $ 2,969,732 $ 430,964 $ 405,035
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $25,190,320 $12,914,256 $1,695,926 $1,521,488
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $12,532,881 $ 5,761,437 $ 369,897 $ 443,119
Financial futures contracts (2,806,148) (1,867,874) (231,038) (464,859)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $ 9,726,733 $ 3,893,563 $ 138,859 $ (21,740)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 9,066,088 $ 4,114,587 $1,207,256 $1,198,710
Financial futures contracts (613,680) 480,977 (53,645) 50,217
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 8,452,408 $ 4,595,564 $1,153,611 $1,248,927
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $18,179,141 $ 8,489,127 $1,292,470 $1,227,187
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $43,369,461 $21,403,383 $2,988,396 $2,748,675
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets California Fund Florida Fund Massachusetts Fund Mississippi Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 15,751,677 $ 25,087,074 $ 11,859,980 $ 993,621
Net realized gain on investments 5,255,764 7,707,320 2,100,741 164,539
Net change in unrealized appreciation (depreciation)
of investments 11,073,573 (1,373,046) 6,334,216 694,352
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 32,081,014 $ 31,421,348 $ 20,294,937 $ 1,852,512
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $(15,751,677) $ (25,087,074) $ (11,798,946) $ (1,010,343)
In excess of net investment income (234,478) (818,995) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $(15,986,155) $ (25,906,069) $ (11,798,946) $ (1,010,343)
- -----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 13,872,922 $ 22,791,638 $ 7,767,689 $ 912,811
Net asset value of shares issued to
shareholders in payment of distributions
declared 6,421,036 8,705,317 5,698,120 461,302
Cost of shares redeemed (76,486,859) (145,393,400) (49,521,970) (5,154,607)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $(56,192,901) $(113,896,445) $ (36,056,161) $ (3,780,494)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $(40,098,042) $(108,381,166) $ (27,560,170) $ (2,938,325)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $361,255,388 $ 612,438,339 $ 267,398,356 $ 23,862,387
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $321,157,346 $ 504,057,173 $ 239,838,186 $ 20,924,062
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net
investment income included in net assets
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ (595,098) $ (924,948) $ (425,502) $ 62,213
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets New York Fund Ohio Fund Rhode Island Fund West Virginia Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 25,190,320 $ 12,914,256 $ 1,695,926 $ 1,521,488
Net realized gain (loss) on investments 9,726,733 3,893,563 138,859 (21,740)
Net change in unrealized appreciation of investments 8,452,408 4,595,564 1,153,611 1,248,927
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 43,369,461 $ 21,403,383 $ 2,988,396 $ 2,748,675
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (25,190,320) $(12,636,530) $ (1,695,926) $ (1,521,488)
In excess of net investment income (269,885) -- (17,054) (2,074)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (25,460,205) $(12,636,530) $ (1,712,980) $ (1,523,562)
- ------------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 20,507,490 $ 8,511,310 $ 3,907,568 $ 1,120,114
Net asset value of shares issued to shareholders in
payment of distributions declared 13,747,243 6,566,507 957,454 756,950
Cost of shares redeemed (125,168,165) (46,673,153) (7,394,931) (9,286,165)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (90,913,432) $(31,595,336) $ (2,529,909) $ (7,409,101)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (73,004,176) $(22,828,483) $ (1,254,493) $ (6,183,988)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 590,397,320 $289,829,392 $ 39,488,351 $ 37,708,260
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 517,393,144 $267,000,909 $ 38,233,858 $ 31,524,272
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net
investment income included in net assets
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ (957,297) $ 369,315 $ (64,555) $ (54,213)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets California Fund Florida Fund Massachusetts Fund Mississippi Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 18,702,103 $ 31,052,406 $ 13,406,177 $ 1,188,292
Net realized gain on investments 4,469,775 5,713,838 3,059,381 281,150
Net change in unrealized appreciation (depreciation)
of investments 1,380,607 (597,568) (1,225,658) 118,573
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 24,552,485 $ 36,168,676 $ 15,239,900 $ 1,588,015
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (18,702,103) $ (31,052,406) $ (13,406,177) $ (1,176,419)
In excess of net investment income (150,927) (388,812) (124,890) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (18,853,030) $ (31,441,218) $ (13,531,067) $ (1,176,419)
- -----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 14,364,623 $ 31,471,588 $ 10,470,142 $ 1,147,571
Net asset value of shares issued to shareholders
in payment of distributions declared 7,648,806 10,725,263 6,731,883 583,144
Cost of shares redeemed (68,108,448) (136,050,959) (42,626,250) (5,036,066)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share
transactions $ (46,095,019) $ (93,854,108) $ (25,424,225) $ (3,305,351)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (40,395,564) $ (89,126,650) $ (23,715,392) $ (2,893,755)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 401,650,952 $ 701,564,989 $ 291,113,748 $ 26,756,142
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 361,255,388 $ 612,438,339 $ 267,398,356 $ 23,862,387
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net
investment income
included in net assets
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ (384,007) $ (788,486) $ (486,536) $ 78,935
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1996
<TABLE>
<CAPTION>
Marathon Marathon Marathon Marathon
Increase (Decrease) in Net Assets New York Fund Ohio Fund Rhode Island Fund West Virginia Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 28,899,389 $ 14,194,475 $ 1,851,536 $ 1,659,387
Net realized gain (loss) on investments 3,977,435 2,116,503 (81,742) (111,842)
Net change in unrealized appreciation of investments 2,584,919 271,971 613,745 757,250
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 35,461,743 $ 16,582,949 $ 2,383,539 $ 2,304,795
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (28,899,389) $ (13,947,604) $ (1,866,993) $ (1,688,413)
In excess of net investment income (793,280) -- (47,501) (79,077)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (29,692,669) $ (13,947,604) $ (1,914,494) $ (1,767,490)
- ----------------------------------------------------------------------------------------------------------------------------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sale of shares $ 29,846,069 $ 9,879,816 $ 4,840,839 $ 2,392,100
Net asset value of shares issued to shareholders
in payment of distributions declared 16,138,017 7,416,302 1,150,335 915,278
Cost of shares redeemed (101,960,405) (45,992,969) (6,835,424) (5,705,484)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from Fund share transactions $ (55,976,319) $ (28,696,851) $ (844,250) $ (2,398,106)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (50,207,245) $ (26,061,506) $ (375,205) $ (1,860,801)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 640,604,565 $ 315,890,898 $ 39,863,556 $ 39,569,061
- ----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 590,397,320 $ 289,829,392 $ 39,488,351 $ 37,708,260
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in excess of) net
investment income included in net assets
- ---------------------------------------------------------------------------------------------------------------------------------
At end of year $ (1,059,850) $ 91,589 $ (47,501) $ (62,756)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon California Fund
---------------------------------------------------
Year Ended
---------------------------------------------------
September 30,
---------------------------------------------------
1997 1996 1995 1994*
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value--Beginning of year $ 9.540 $ 9.410 $ 9.290 $ 9.560
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 0.451 $ 0.464 $ 0.475 $ 0.240
Net realized and unrealized gain (loss) on investments 0.477 0.135 0.253 (0.234)
- ---------------------------------------------------------------------------------------------------------------
Total income from operations $ 0.928 $ 0.599 $ 0.728 $ 0.006
- ---------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------
From net investment income $ (0.451) $ (0.465) $ (0.475) $ (0.240)
In excess of net investment income (0.007) (0.004) (0.016) (0.036)
From net realized gain on investments -- -- -- --
In excess of net realized gain on investments -- -- (0.117) --
- ---------------------------------------------------------------------------------------------------------------
Total distributions $ (0.458) $ (0.469) $ (0.608) $ (0.276)
- ---------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 10.010 $ 9.540 $ 9.410 $ 9.290
- ---------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 9.98% 6.49% 8.30% 0.06%
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 321,157 $ 361,255 $401,742 $ 439,591
Ratio of net expenses to average daily net assets/(2)/(3)/ 1.69% 1.66% 1.65% 1.63%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.68% 1.65% 1.64% --
Ratio of net investment income to average daily net assets 4.66% 4.87% 5.19% 5.06%+
Portfolio Turnover/(4)/ -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Marathon California Fund
---------------------------------------------------
Year Ended
---------------------------------------------------
March 31,
---------------------------------------------------
1994 1993 1992**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value--Beginning of year $ 10.200 $ 9.850 $ 10.000
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 0.480 $ 0.509 $ 0.264
Net realized and unrealized gain (loss) on investments (0.395) 0.524 (0.100)
- ---------------------------------------------------------------------------------------------------------------
Total income from operations $ 0.085 $ 1.033 $ 0.164
- ---------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------
From net investment income $ (0.480) $ (0.509) $ (0.264)
In excess of net investment income (0.092) (0.115) (0.050)
From net realized gain on investments (0.153) (0.059) --
In excess of net realized gain on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions $ (0.725) $ (0.683) $ (0.314)
- ---------------------------------------------------------------------------------------------------------------
Net asset value--End of year $ 9.560 $ 10.200 $ 9.850
- ---------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 0.55% 10.82% 3.29%
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 463,414 $ 438,938 $362,597
Ratio of net expenses to average daily net assets/(2)/(3)/ 1.67% 1.84% 1.87%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ -- -- --
Ratio of net investment income to average daily net assets 4.64% 5.05% 5.28%+
Portfolio Turnover/(4)/ 5% 139% 65%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the six months ended September 30, 1994. The Fund changed its fiscal
year end from March 31 to September 30, effective September 30, 1994.
** For the six months ended March 31, 1992. The Fund changed its year end
from September 30 to March 31, effective March 31, 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 years ended September 30, 1995 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 the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
19
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Florida Fund
--------------------------------------------------------------------
Year Ended September 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.780 $ 10.720 $ 10.270 $ 11.700 $ 10.940
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.488 $ 0.505 $ 0.514 $ 0.514 $ 0.516
Net realized and unrealized gain (loss) on investments 0.136 0.067 0.469 (1.228) 1.040
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.624 $ 0.572 $ 0.983 $ (0.714) $ 1.556
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.488) $ (0.506) $ (0.514) $ (0.514) $ (0.516)
In excess of net investment income (0.016) (0.006) (0.019) (0.082) (0.121)
From net realized gain on investments -- -- -- -- (0.159)
In excess of net realized gain on investments -- -- -- (0.120) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.504) $ (0.512) $ (0.533) $ (0.716) $ (0.796)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.900 $ 10.780 $ 10.720 $ 10.270 $ 11.700
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 5.89% 5.43% 9.90% (6.34)% 14.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 504,057 $612,438 $ 701,565 $760,867 $776,856
Ratio of net expenses to average daily net assets/(2)(3)/ 1.57% 1.55% 1.54% 1.44% 1.53%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.53% 1.52% 1.51% -- --
Ratio of net investment income to average daily net assets 4.50% 4.67% 4.97% 4.70% 4.54%
Portfolio Turnover/(4)/ -- -- -- -- 9%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(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 years ended September 30, 1995 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 the Portfolio is shown in the Portfolio's
financial statements which are included elsewhere in this report.
See notes to financial statements
20
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Massachusetts Fund
----------------------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.330 $ 10.270 $ 9.990 $ 11.250 $ 10.640
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.487 $ 0.491 $ 0.499 $ 0.505 $ 0.514
Net realized and unrealized gain (loss) on investments 0.360 0.066 0.307 (1.108) 0.784
- -----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.847 $ 0.557 $ 0.806 $ (0.603) $ 1.298
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.487) $ (0.492) $ (0.499) $ (0.505) $ (0.514)
In excess of net investment income -- (0.005) (0.027) (0.087) (0.116)
From net realized gain on investments -- -- -- -- (0.058)
In excess of net realized gain on investments -- -- -- (0.065) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.487) $ (0.497) $ (0.526) $ (0.657) $ (0.688)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.690 $ 10.330 $ 10.270 $ 9.990 $ 11.250
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.41% 5.53% 8.38% (5.57)% 12.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 239,838 $267,398 $ 291,114 $295,011 $286,801
Ratio of net expenses to average daily net assets/(2)(3)/ 1.61% 1.59% 1.58% 1.50% 1.58%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.59% 1.58% 1.56% -- --
Ratio of net investment income to average daily net assets 4.70% 4.75% 5.00% 4.75% 4.69%
Portfolio Turnover/(4)/ -- -- -- -- 27%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(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 years ended September 30, 1995 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 the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
21
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Mississippi Fund
----------------------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------------------
1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.610 $ 9.480 $ 9.110 $ 10.260 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.433 $ 0.451 $ 0.449 $ 0.453 $ 0.106
Net realized and unrealized gain (loss) on investments 0.362 0.122 0.379 (1.072) 0.300
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.795 $ 0.573 $ 0.828 $ (0.619) $ 0.406
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.435) $ (0.443) $ (0.449) $ (0.453) $ (0.106)
In excess of net investment income -- -- (0.009) (0.071) (0.040)
In excess of net realized gain on investments -- -- -- (0.007) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.435) $ (0.443) $ (0.458) $ (0.531) $ (0.146)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.970 $ 9.610 $ 9.480 $ 9.110 $ 10.260
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 8.45% 6.17% 9.40% (6.20)% 3.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 20,924 $ 23,862 $ 26,756 $ 26,771 $ 11,810
Ratio of net expenses to average daily net assets /(2)//(3)/ 1.60% 1.44% 1.36% 0.99% 0.75%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction /(2)/ 1.59% 1.41% 1.33% -- --
Ratio of net investment income to average daily net assets 4.39% 4.64% 4.89% 4.63% 3.50%+
- ------------------------------------------------------------------------------------------------------------------------------------
</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 Advisor or the 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)/ 1.55% 1.49% 1.45% 1.44%+
Expenses after custodian fee reduction /(2)/ 1.52% 1.46% -- --
Net investment income 4.53% 4.76% 4.17% 2.81%+
Net investment income per share $ 0.440 $ 0.437 $ 0.407 $ 0.085
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, June 11, 1993, 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 years ended September 30, 1995 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.
See notes to financial statements
22
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon New York Fund
---------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.930 $ 10.830 $ 10.450 $ 11.880 $ 11.070
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.506 $ 0.506 $ 0.523 $ 0.528 $ 0.535
Net realized and unrealized gain (loss) on investments 0.375 0.116 0.406 (1.165) 1.014
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.881 $ 0.622 $ 0.929 $ (0.637) $ 1.549
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.506) $ (0.508) $ (0.523) $ (0.528) $ (0.535)
In excess of net investment income (0.005) (0.014) (0.026) (0.089) (0.120)
From net realized gain on investments -- -- -- -- (0.084)
In excess of net realized gain on investments -- -- -- (0.176) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.511) $ (0.522) $ (0.549) $ (0.793) $ (0.739)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 11.300 $ 10.930 $ 10.830 $ 10.450 $ 11.880
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.23% 5.87% 9.23% (5.62)% 14.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 517,393 $ 590,397 $ 640,605 $ 648,325 $650,361
Ratio of net expenses to average daily net assets/(2)(3)/ 1.63% 1.54% 1.55% 1.46% 1.55%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.63% 1.51% 1.51% -- --
Ratio of net investment income to average daily net assets 4.56% 4.64% 4.99% 4.72% 4.68%
Portfolio Turnover/(4)/ -- -- -- -- 11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(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 years ended September 30, 1995 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 the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
23
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Ohio Fund
--------------------------------------------------------------------
Year Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 10.590 $ 10.510 $ 10.070 $ 11.300 $ 10.550
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.499 $ 0.494 $ 0.487 $ 0.494 $ 0.499
Net realized and unrealized gain (loss) on investments 0.328 0.071 0.461 (1.081) 0.901
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.827 $ 0.565 $ 0.948 $ (0.587) $ 1.400
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.487) $ (0.485) $ (0.487) $ (0.494) $ (0.499)
In excess of net investment income -- -- (0.021) (0.084) (0.118)
From net realized gain on investments -- -- -- -- (0.033)
In excess of net realized gain on investments -- -- -- (0.065) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.487) $ (0.485) $ (0.508) $ (0.643) $ (0.650)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.930 $ 10.590 $ 10.510 $ 10.070 $ 11.300
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 7.98% 5.48% 9.74% (5.39)% 13.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 267,001 $289,829 $ 315,891 $321,578 $299,331
Ratio of net expenses to average daily net assets/(2)/(3)/ 1.63% 1.63% 1.59% 1.50% 1.58%
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.62% 1.61% 1.57% -- --
Ratio of net investment income to average daily net assets 4.65% 4.66% 4.80% 4.62% 4.57%
Portfolio Turnover/(4)/ -- -- -- -- 12%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(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 years ended September 30, 1995 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 the Portfolio is shown in
the Portfolio's financial statements which are included elsewhere in this
report.
See notes to financial statements
24
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon Rhode Island Fund
------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------------------
1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.510 $ 9.400 $ 9.090 $ 10.330 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.427 $ 0.440 $ 0.452 $ 0.454 $ 0.113
Net realized and unrealized gain (loss) on investments 0.334 0.125 0.332 (1.146) 0.361
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.761 $ 0.565 $ 0.784 $ (0.692) $ 0.474
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.427) $ (0.444) $ (0.452) $ (0.454) $ (0.113)
In excess of net investment income (0.004) (0.011) (0.022) (0.078) (0.008)
From net realized gain on investments -- -- -- -- (0.023)
In excess of net realized gain on investments -- -- -- (0.016) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.431) $ (0.455) $ (0.474) $ (0.548) $ (0.144)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.840 $ 9.510 $ 9.400 $ 9.090 $ 10.330
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.19% 6.14% 8.94% (6.91)% 4.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 38,234 $ 39,488 $ 39,864 $ 34,261 $ 17,680
Ratio of net expenses to average daily net assets/(2)(3)/ 1.40% 1.35% 1.33% 1.02% 0.75%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.35% 1.32% 1.29% -- --
Ratio of net investment income to average daily net assets 4.43% 4.63% 4.92% 4.65% 3.70%+
- ------------------------------------------------------------------------------------------------------------------------------------
</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> <C>
Expenses/(2)(3)/ 1.52% 1.47% 1.46% 1.38% 1.30%+
Expenses after custodian fee reduction/(2)/ 1.47% 1.44% 1.42% -- --
Net investment income 4.31% 4.51% 4.79% 4.29% 3.15%+
Net investment income per share $ 0.415 $ 0.429 $ 0.440 $ 0.418 $ 0.096
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, June 11, 1993, 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 years ended September 30, 1995 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.
See notes to financial statements
25
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Marathon West Virginia Fund
-----------------------------------------------------------------------
Year Ended September 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.620 $ 9.500 $ 9.130 $ 10.220 $ 10.000
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.419 $ 0.420 $ 0.436 $ 0.450 $ 0.103
Net realized and unrealized gain (loss) on investments 0.351 0.147 0.393 (1.011) 0.262
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.770 $ 0.567 $ 0.829 $ (0.561) $ 0.365
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.419) $ (0.427) $ (0.436) $ (0.450) $ (0.103)
In excess of net investment income (0.001) (0.020) (0.023) (0.069) (0.042)
In excess of net realized gain on investments -- -- -- (0.010) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.420) $ (0.447) $ (0.459) $ (0.529) $ (0.145)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.970 $ 9.620 $ 9.500 $ 9.130 $ 10.220
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 8.18% 6.02% 9.39% (5.66)% 3.47%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 31,524 $ 37,708 $ 39,569 $ 38,476 $ 25,717
Ratio of net expenses to average daily net assets/(2)(3)/ 1.53% 1.55% 1.40% 0.95% 0.75%+
Ratio of net expenses to average daily net assets, after
custodian fee reduction/(2)/ 1.51% 1.51% 1.38% -- --
Ratio of net investment income to average daily net assets 4.31% 4.30% 4.74% 4.62% 3.40%+
</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>
Expenses/(2)(3)/ 1.48% 1.32% 1.19%+
Expenses after custodian fee reduction/(2)/ 1.46% -- --
Net investment income 4.66% 4.25% 2.96%+
Net investment income per share $ 0.429 $ 0.414 $ 0.090
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, June 11, 1993, 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 years ended September 30, 1995 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.
See notes to financial statements
26
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Eaton Vance Municipals Trust (the Trust) is an entity of the type commonly
known as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust presently consists of sixty Funds, eight of which are included in
these financial statements. They include EV Marathon California Municipals
Fund ("Marathon California Fund"), EV Marathon Florida Municipals Fund
("Marathon Florida Fund"), EV Marathon Massachusetts Municipals Fund
("Marathon Massachusetts Fund"), EV Marathon Mississippi Municipals Fund
("Marathon Mississippi Fund"), EV Marathon New York Municipals Fund ("Marathon
New York Fund"), EV Marathon Ohio Municipals Fund ("Marathon Ohio Fund"), EV
Marathon Rhode Island Municipals Fund ("Marathon Rhode Island Fund") and EV
Marathon West Virginia Municipals Fund ("Marathon West Virginia Fund"), each
of which is registered under the Investment Company Act of 1940 as a non-
diversified open-end management investment company. 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 California Fund
invests its assets in the California Municipals Portfolio, the Marathon
Florida Fund invests its assets in the Florida Municipals Portfolio, the
Marathon Massachusetts Fund invests its assets in the Massachusetts Municipals
Portfolio, the Marathon Mississippi Fund invests its assets in the Mississippi
Municipals Portfolio, the Marathon New York Fund invests its assets in the New
York Municipals Portfolio, the Marathon Ohio Fund invests its assets in the
Ohio Municipals Portfolio, the Marathon Rhode Island Fund invests its assets
in the Rhode Island Municipals Portfolio and the Marathon West Virginia Fund
invests its assets in the West 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 (98.6%, 98.4%,
94.9%, 94.9%, 98.4%, 98.8%, 95.4% and 94.3% at September 30, 1997 for the
Marathon California Fund, Marathon Florida Fund, Marathon Massachusetts Fund,
Marathon Mississippi Fund, Marathon New York Fund, Marathon Ohio Fund,
Marathon Rhode Island Fund and Marathon West 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
California Fund, Marathon Florida Fund, Marathon Massachusetts Fund, Marathon
Mississippi Fund, Marathon New York Fund, Marathon Ohio Fund, Marathon Rhode
Island Fund and Marathon West Virginia Fund (the Successor Funds), separate
series of the Trust, will acquire substantially all of the assets and
liabilities of the EV Traditional California Municipals Fund, EV Traditional
Florida Municipals Fund, EV Traditional Massachusetts Municipals Fund, EV
Traditional Mississippi Municipals Fund, EV Traditional New York Municipals
Fund, EV Traditional Ohio Municipals Fund, EV Traditional Rhode Island
Municipals Fund and EV Traditional West Virginia Municipals Fund, respectively
(the Acquired Funds). The transactions will be structured for tax purposes to
qualify as a tax-free reorganization under the Internal Revenue Code. As a
result of the reorganization, shareholders of the acquired funds will receive
Class A Shares of the successor funds. The reorganization will occur after the
close of business, September 30, 1997.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Valuation of securities by the Portfolios is
discussed in Note 1A of the Portfolios' Notes to Financial Statements which
are included elsewhere in this report.
B Income -- Each Fund's net investment income consists of the Fund's pro rata
share of the net investment income of its corresponding Portfolio, less all
actual and accrued expenses of each Fund determined in accordance with
generally accepted accounting principles.
C Federal Taxes -- Each Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt income,
including any net realized gain. Accordingly, no
27
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
provision for federal income or excise tax is necessary. At September 30,
1997, the Funds, for federal income tax purposes, had capital loss carryovers
which will reduce taxable income arising from future net realized gain, if
any, to the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of the distributions 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 California Fund $18,822,061 September 30, 2004
1,112,204 September 30, 2003
6,075,665 September 30, 2002
Marathon Florida Fund $15,708,161 September 30, 2004
Marathon Massachusetts Fund $11,092,195 September 30, 2004
4,583,369 September 30, 2003
Marathon Mississippi Fund $ 1,395,947 September 30, 2004
574,476 September 30, 2003
Marathon New York Fund $ 9,988,977 September 30, 2004
Marathon Ohio Fund $ 1,960,579 September 30, 2004
Marathon Rhode Island Fund $ 1,346,838 September 30, 2004
485,900 September 30, 2003
Marathon West Virginia Fund $ 147,162 September 30, 2005
1,089,209 September 30, 2004
485,831 September 30, 2003
</TABLE>
Dividends paid by each Fund from net tax-exempt interest on 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 exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986 may be considered a tax
preference item to shareholders.
D Deferred Organization Expenses -- Costs incurred by each Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
F Other -- Investment transactions are accounted for on a trade-date basis.
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the 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 reflected as a reduction of operating expenses
on the statements of operations.
2 Distributions to Shareholders
------------------------------------------------------------------------------
The net investment income of the Funds is determined daily and substantially
all of the net investment income so determined is declared as a dividend to
shareholders of record at the time of declaration. Distributions are paid
monthly. Distributions of allocated realized capital gains, if any, are made
at least annually. Shareholders may reinvest capital gain distributions in
additional shares of the Fund at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares of the Funds 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 over distributions only 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.
28
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
During the year ended September 30, 1997, the following reclassifications were
made due to permanent differences between book and tax accounting:
<TABLE>
<CAPTION>
Marathon
Marathon Marathon Marathon West
Increase/ California Florida New York Virginia
(decrease) Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated
distributions
in excess of
net investment
income $ 23,387 $ 682,533 $ 372,438 $ 10,617
Paid-in capital (23,387) (682,533) (372,438) (10,617)
------------------------------------------------------------------------------
</TABLE>
Net investment income, net realized gains and net assets were not affected by
these reclassifications. The tax treatment of distributions for the calendar
year will be reported to shareholders prior to February 1, 1998 and will be
based on tax accounting methods which may differ from amounts determined for
financial statement purposes.
3 Shares of Beneficial Interest
------------------------------------------------------------------------------
The Funds' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Marathon California Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 1,432,515 1,499,839
Issued to shareholders electing to
receive payments of distributions
in Fund shares 661,973 801,409
Redemptions (7,897,702) (7,128,779)
------------------------------------------------------------------------------
Net Decrease (5,803,214) (4,827,531)
------------------------------------------------------------------------------
<CAPTION>
Marathon Florida Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 2,104,483 2,878,683
Issued to shareholders electing to
receive payments of distributions
in Fund shares 806,134 990,200
Redemptions (13,472,545) (12,531,226)
------------------------------------------------------------------------------
Net Decrease (10,561,928) (8,662,343)
------------------------------------------------------------------------------
<CAPTION>
Marathon Massachusetts Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 747,491 1,006,896
Issued to shareholders electing to
receive payments of distributions
in Fund shares 546,499 649,670
Redemptions (4,753,239) (4,107,661)
------------------------------------------------------------------------------
Net Decrease (3,459,249) (2,451,095)
------------------------------------------------------------------------------
<CAPTION>
Marathon Mississippi Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 93,560 121,491
Issued to shareholders electing to
receive payments of distributions
in Fund shares 47,277 60,735
Redemptions (526,804) (522,310)
------------------------------------------------------------------------------
Net Decrease (385,967) (340,084)
------------------------------------------------------------------------------
<CAPTION>
Marathon New York Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 1,854,790 2,717,911
Issued to shareholders electing to
receive payments of distributions
in Fund shares 1,243,630 1,475,640
Redemptions (11,329,986) (9,324,460)
------------------------------------------------------------------------------
Net Decrease (8,231,566) (5,130,909)
------------------------------------------------------------------------------
<CAPTION>
Marathon Ohio Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 795,756 927,885
Issued to shareholders electing to
receive payments of distributions
in Fund shares 612,550 699,228
Redemptions (4,355,129) (4,331,269)
------------------------------------------------------------------------------
Net Decrease (2,946,823) (2,704,156)
------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Marathon Rhode Island Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 405,304 508,109
Issued to shareholders electing to
receive payments of distributions
in Fund shares 99,538 121,103
Redemptions (770,050) (718,322)
------------------------------------------------------------------------------
Net Decrease (265,208) (89,110)
------------------------------------------------------------------------------
<CAPTION>
Marathon West Virginia Fund
------------------------------
Year Ended September 30,
------------------------------
1997 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 115,286 248,460
Issued to shareholders electing to
receive payments of distributions
in Fund shares 77,703 95,281
Redemptions (949,690) (591,677)
------------------------------------------------------------------------------
Net Decrease (756,701) (247,936)
------------------------------------------------------------------------------
</TABLE>
4 Transactions with Affiliates
----------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the Administrator of each Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolios' Notes to Financial Statements which are
included elsewhere in this report. 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.
Certain of the officers and Trustees of the Funds and Portfolios are
officers and directors/trustees of the above organizations.
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 September 30, 1997, Marathon California Fund, Marathon
Florida Fund, Marathon Massachusetts Fund, Marathon Mississippi Fund,
Marathon New York Fund, Marathon Ohio Fund, Marathon Rhode Island Fund and
Marathon West Virginia Fund, paid $2,534,611, $4,182,641, $1,891,419,
$169,917, $4,144,448, $2,082,415, $287,096 and $264,807, respectively, to
EVD, representing 0.75% of each Fund's average daily net assets. At
September 30, 1997, the amount of Uncovered Distribution Charges of EVD
calculated under the Plans for Marathon California Fund, Marathon Florida
Fund, Marathon Massachusetts Fund, Marathon Mississippi Fund, Marathon New
York Fund, Marathon Ohio Fund, Marathon Rhode Island Fund and Marathon West
Virginia Fund were approximately $2,003,000, $12,481,000, $6,286,000,
$806,000, $11,296,000, $6,900,000, $1,414,000 and $1,126,000, respectively.
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% (0.25% for the
Marathon California Fund) 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 September 30, 1997,
Marathon California Fund, Marathon Florida Fund, Marathon Massachusetts
Fund, Marathon Mississippi Fund, Marathon New York Fund, Marathon Ohio Fund,
Marathon Rhode Island Fund and Marathon West Virginia Fund paid or accrued
service fees to or payable to EVD in the amount of $811,626, $1,071,556,
30
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
$482,356, $41,321, $1,061,314, $524,067, $69,528, and $60,894, 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 Funds 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. CDSC charges are paid to EVD to reduce the
amount of Uncovered Distribution Charges calculated under each Fund's
Distribution Plan. CDSC charges received when no Uncovered Distribution
Charges exist will be credited to the Fund. EVD received approximately
$849,000, $1,907,000, $708,000, $132,000, $1,706,000, $729,000, $167,000 and
$180,000 of CDSC paid by shareholders of Marathon California Fund, Marathon
Florida Fund, Marathon Massachusetts Fund, Marathon Mississippi Fund,
Marathon New York Fund, Marathon Ohio Fund, Marathon Rhode Island Fund and
Marathon West Virginia, respectively, for the year ended September 30, 1997.
7 Investment Transactions
----------------------------------------------------------------------------
Increases and decreases in each Fund's investment in its corresponding
Portfolio for the year ended September 30, 1997 were as follows:
<TABLE>
<S> <C>
Marathon California Fund
----------------------------------------------------------------------------
Increases $ 14,604,403
Decreases 90,671,693
Marathon Florida Fund
----------------------------------------------------------------------------
Increases $ 23,791,040
Decreases 170,273,258
Marathon Massachusetts Fund
----------------------------------------------------------------------------
Increases $ 8,258,251
Decreases 58,619,890
Marathon Mississippi Fund
----------------------------------------------------------------------------
Increases $ 1,010,433
Decreases 6,121,480
Marathon New York Fund
----------------------------------------------------------------------------
Increases $ 21,773,757
Decreases 144,484,357
Marathon Ohio Fund
----------------------------------------------------------------------------
Increases $ 9,583,490
Decreases 56,556,309
Marathon Rhode Island Fund
----------------------------------------------------------------------------
Increases $ 4,159,564
Decreases 8,841,781
Marathon West Virginia Fund
----------------------------------------------------------------------------
Increases $ 1,203,369
Decreases 10,568,920
</TABLE>
8 Subsequent Event
----------------------------------------------------------------------------
Effective October 1, 1997, the EV Marathon California Municipals Fund, EV
Marathon Florida Municipals Fund EV Marathon Massachusetts Municipals Fund,
EV Marathon Mississippi Municipals Fund, EV Marathon New York Municipals
Fund, EV Marathon Ohio Municipals Fund, EV Marathon Rhode Island Municipals
Fund, and EV Marathon West Virginia Municipals Fund will change their
respective names to Eaton Vance California Municipals Fund, Eaton Vance
Florida Municipals Fund, Eaton Vance Massachusetts Municipals Fund, Eaton
Vance Mississippi Municipals Fund, Eaton Vance New York Municipals Fund,
Eaton Vance Ohio Municipals Fund, Eaton Vance Rhode Island Municipals Fund,
Eaton Vance West Virginia Municipals Fund, and shares of the Funds will be
designated as Class B shares. One additional class of shares will also be
offered.
31
<PAGE>
EV Marathon Municipals Funds as of September 30, 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 California Municipals Fund, EV Marathon Florida Municipals Fund, EV
Marathon Massachusetts Municipals Fund, EV Marathon Mississippi Municipals Fund,
EV Marathon New York Municipals Fund, EV Marathon Ohio Municipals Fund, EV
Marathon Rhode Island Municipals Fund and EV Marathon West Virginia Municipals
Fund (the Funds) (certain of the series constituting Eaton Vance Municipals
Trust) as of September 30, 1997, the related statements of operations for year
then ended, the statements of changes in net assets for the years ended
September 30, 1997 and 1996 and the financial highlights for each of the years
in the five year period ended September 30, 1997. For the EV Marathon California
Municipals Fund, the financial highlights are for each of the years in the
three-year period ended September 30, 1997, the six months ended September 30,
1994, and for each of the years in the three-year period ended March 31, 1994.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
aforementioned Funds of Eaton Vance Municipals Trust at September 30, 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
November 7, 1997
32
<PAGE>
California Municipals Portfolio as of September 30, 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 -- 7.1%
- --------------------------------------------------------------------------------
NR BBB- $ 4,985 Central Valley Financing
Authority, (Carson Ice),
6.20%, 7/1/20 $ 5,211,917
NR BBB- 10,900 Sacramento Cogeneration
Authority, (Procter &
Gamble), 6.50%, 7/1/21 11,747,257
NR BBB- 6,000 Sacramento Power
Authority, Cogeneration
Project, 6.00%, 7/1/22 6,235,560
- --------------------------------------------------------------------------------
$ 23,194,734
- --------------------------------------------------------------------------------
Electric Utilities -- 1.4%
- --------------------------------------------------------------------------------
A2 A $ 4,100 California Pollution
Control Financing
Authority, (San Diego Gas
& Electric), 5.90%, 6/1/14 $ 4,443,334
- --------------------------------------------------------------------------------
$ 4,443,334
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 15.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,000 City and County of San
Francisco Sewer, (AMBAC)
Variable Rate, 10/1/21/(1)/ $ 3,408,750
Aaa AAA 8,000 County of Sacramento,
Single Family, (AMT)
(GNMA), 8.125%, 7/1/16/(2)/ 10,655,040
Aaa AAA 6,000 County of Sacramento,
Single Family, (AMT)
(GNMA), 8.25%, 1/1/21 8,238,540
Aaa NR 14,285 County of Sacramento,
Single Family, (AMT)
(GNMA), 8.50%, 11/1/16 19,698,730
NR BBB 3,910 Fontana Public Financing
Authority, 7.00%, 9/1/21 4,213,142
Aaa AAA 6,400 Port Oakland, CA,
0.00%, 11/1/05 3,861,056
- --------------------------------------------------------------------------------
$ 50,075,258
- --------------------------------------------------------------------------------
General Obligations -- 1.8%
- --------------------------------------------------------------------------------
Aa3 AA $ 5,000 East Bay Municipal
Utilities District,
5.00%, 4/1/15 $ 4,819,200
NR NR 1,000 Eastern Plumas, CA,
Health Care, (District
Hospital), 7.50%, 8/1/07 1,004,470
- --------------------------------------------------------------------------------
$ 5,823,670
- --------------------------------------------------------------------------------
Hospitals -- 2.6%
- --------------------------------------------------------------------------------
NR BBB+ $ 2,700 City of Stockton, Dameron
Hospital Association,
8.30%, 12/1/14 $ 2,773,899
NR BBB- 1,500 City of Woodland,
(Woodland Memorial
Hospital), 8.20%, 8/1/15 1,567,785
Ba2 NR 1,000 San Bernadino, CA, San
Bernadino Community
Hospital, 7.875%, 12/1/08 1,051,530
Ba2 NR 3,000 San Bernadino, CA, San
Bernadino Community
Hospital, 7.875%, 12/1/19 3,154,590
- --------------------------------------------------------------------------------
$ 8,547,804
- --------------------------------------------------------------------------------
Housing -- 6.8%
- --------------------------------------------------------------------------------
Aa AA- $ 2,730 California Housing
Finance Agency, 7.375%,
8/1/11 $ 2,842,039
Aa AA- 3,665 California Housing
Finance Agency, 7.40%,
8/1/26 3,985,614
Aa AA- 3,610 California Housing
Finance Agency, 7.50%,
8/1/25 3,938,654
Aa AA- 5,630 California Housing
Finance Agency, 7.65%,
8/1/23 5,859,591
Aa AA- 1,220 California Housing
Finance Agency, 8.60%,
8/1/19 1,263,444
NR A+ 1,585 City of Oakland, Housing
Finance Agency, 7.10%,
1/1/10 1,671,208
NR NR 2,000 Los Angeles County
Housing Authority, CA,
Multifamily Housing,
Corporate Fund for
Housing Projects, 10.50%,
12/1/29 1,810,640
A1 NR 770 Los Angeles County,
Single Family, 7.875%,
8/1/16 820,959
- --------------------------------------------------------------------------------
$ 22,192,149
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 3.6%
- --------------------------------------------------------------------------------
A3 A $ 5,000 California Pollution
Control Financing
Authority, (Browning
Ferris Industries, Inc.),
Series A, 5.80%, 12/1/16 $ 5,100,500
NR NR 3,000 California Pollution
Control, (Laidlaw
Environmental),
(AMT), 6.70%, 7/1/07 3,077,940
</TABLE>
See notes to financial statements
33
<PAGE>
California Municipals Portfolio as of September 30, 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 BB+ $ 3,600 California Statewide
Community Development
Authority,
(United Airlines), (AMT),
5.70%, 10/1/33 $ 3,573,828
- --------------------------------------------------------------------------------
$ 11,752,268
- --------------------------------------------------------------------------------
Insured-Education -- 0.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,330 University of California,
Multiple Purpose Project,
(MBIA), 4.75%, 9/1/21 $ 3,020,343
- --------------------------------------------------------------------------------
$ 3,020,343
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 6.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 8,000 Northern California Power
Agency (MBIA) Variable
Rate, 8/1/25/(1)/ $ 9,520,000
Aaa AAA 2,000 Southern California
Public
Power Authority, (FGIC)
Variable Rate, 7/1/12/(1)/ 2,072,500
Aaa AAA 7,070 Southern California
Public Power
Authority, (MBIA),
0.00%, 7/1/15 2,769,248
Aaa AAA 6,915 Southern California
Public Power
Authority, (MBIA),
5.00%, 1/1/20 6,584,463
- --------------------------------------------------------------------------------
$ 20,946,211
- --------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 5.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,300 California Statewide
Community Development
Authority, (AMBAC),
5.68%, 1/1/24 $ 3,213,507
Aaa AAA 4,350 City of Stockton,
Wastewater Treatment
Plant, (FGIC),
6.80%, 9/1/24 4,908,540
Aaa AAA 7,700 Moulton Niguel Water
District (AMBAC),
4.80%, 9/1/17 7,117,110
Aaa AAA 13,985 Visalia Unified School
District, (MBIA),
0.00%, 12/1/17 3,869,090
- --------------------------------------------------------------------------------
$ 19,108,247
- --------------------------------------------------------------------------------
Insured-Solid Waste -- 0.5%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,500 Inland Empire Solid Waste
Finance Authority, (FSA),
6.25%, 8/1/11 $ 1,673,565
- --------------------------------------------------------------------------------
$ 1,673,565
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 1.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,850 City of San Jose
Redevelopment Agency,
(MBIA), 4.75%, 8/1/24 $ 4,373,876
- --------------------------------------------------------------------------------
$ 4,373,876
- --------------------------------------------------------------------------------
Insured-Transportation -- 2.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 4,000 City and County of San
Francisco Airport,
(MBIA), 6.75%, 5/1/13 $ 4,483,360
Aaa AAA 3,125 Port Oakland, CA, (MBIA),
5.375%, 11/1/25 3,043,156
Aaa AAA 7,800 San Joaquin Hills, CA,
Transportation Corridor
Agency, (MBIA),
0.00%, 1/15/24 1,846,494
- --------------------------------------------------------------------------------
$ 9,373,010
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 4.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 5,000 East Bay Municipal
Utilities District,
(MBIA) Variable Rate,
6/1/08/(1)/ $ 5,256,250
Aaa AAA 5,000 East Bay, CA, Municipal
Utility District, (FGIC),
5.00%, 6/1/26 4,751,550
Aaa AAA 2,000 Metropolitan Water
District, Southern
California Waterworks,
(MBIA), 5.00%, 7/1/27 1,901,900
Aaa AAA 3,000 San Diego County Water
Authority, (FGIC)
Variable Rate, 4/22/09/(1)/ 3,461,250
- --------------------------------------------------------------------------------
$ 15,370,950
- --------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 18.0%
- --------------------------------------------------------------------------------
A1 A $ 6,500 California Public Works,
(University of California),
5.00%, 6/1/23 $ 6,106,360
</TABLE>
See notes to financial statements
34
<PAGE>
California Municipals Portfolio as of September 30, 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 (continued)
- --------------------------------------------------------------------------------
A1 A $ 5,000 California Public Works,
(University of California),
5.25%, 6/1/20 $ 4,940,850
A1 A 8,000 California Public Works,
(University of California),
5.50%, 6/1/14 8,314,640
Aaa AAA 6,850 California Statewide
Public Works, (J. Paul Getty
Trust), 5.00%, 10/1/23 6,524,625
A1 A+ 4,000 City of Sacramento
Financing Authority,
5.40%, 11/1/20 4,052,720
NR NR 7,000 County of Los Angeles,
(Marina Del Ray), 6.50%,
7/1/08 7,529,200
Baa1 BBB 5,115 County of Los Angeles,
Disney Parking Project,
0.00%, 3/1/16 1,743,294
Baa1 BBB 1,925 County of Los Angeles,
Disney Parking Project,
0.00%, 3/1/17 613,036
Baa1 BBB 5,000 County of Los Angeles,
Disney Parking Project,
0.00%, 9/1/17 1,546,050
Baa1 BBB 5,370 County of Los Angeles,
Disney Parking Project,
0.00%, 3/1/18 1,612,289
Baa1 BBB 3,100 County of Los Angeles,
Disney Parking Project,
0.00%, 3/1/20 818,307
Baa1 BBB 6,925 County of Los Angeles,
Disney Parking Project,
0.00%, 9/1/20 1,774,531
Baa1 BBB 1,000 County of Los Angeles,
Disney Parking Project,
6.50%, 3/1/23 1,043,500
Baa3 BBB- 2,750 Inglewood, CA, 7.00%,
8/1/19 2,962,053
A1 A+ 8,000 Pasadena Parking Facility
Project, 6.25%, 1/1/18 8,925,440
- --------------------------------------------------------------------------------
$ 58,506,895
- --------------------------------------------------------------------------------
Nursing Homes -- 1.0%
- --------------------------------------------------------------------------------
NR NR $ 3,105 Banning, CA, 9.50%,
12/1/11 $ 3,185,326
- --------------------------------------------------------------------------------
$ 3,185,326
- --------------------------------------------------------------------------------
Special Tax Revenue -- 9.8%
- --------------------------------------------------------------------------------
NR NR $ 2,880 City of Commerce, Joint
Power Financing Authority,
8.00%, 3/1/22 $ 3,109,968
NR NR 1,960 City of Fairfield, North
Cordelia District,
7.375%, 9/2/18 2,028,502
NR NR 830 City of Fairfield, North
Cordelia District, 8.00%,
9/2/11 861,424
NR BBB 600 City of Rancho Mirage,
Joint Power Financing
Authority, 7.50%, 4/1/17 655,314
NR NR 1,400 City of Simi Valley
Community Development,
Sycamore Plaza II, 8.20%,
9/1/12 1,411,886
NR BBB 5,000 Contra Costa County,
Public Financing Authority,
7.10%, 8/1/22 5,461,150
NR BBB+ 8,220 Fontana Redevelopment
Agency, Jurupa Hills,
7.00%, 10/1/14 8,961,197
NR NR 3,000 Riverside County
Community Facilities
District, 7.55%, 9/1/17 3,179,730
NR BBB 2,500 Riverside County
Redevelopment Agency,
7.50%, 10/1/26 2,859,850
Baa BBB+ 3,000 Westminster Redevelopment
Agency, Community
Redevelopment Project,
7.30%, 8/1/21 3,271,020
- --------------------------------------------------------------------------------
$ 31,800,041
- --------------------------------------------------------------------------------
Transportation -- 8.6%
- --------------------------------------------------------------------------------
NR BBB $ 3,050 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 3,306,749
Aa3 AA- 2,000 Long Beach, CA (AMT),
7.25%, 5/15/19 2,078,880
Baa3 NR 35,975 San Joaquin Hills
Transportation Corridor
Agency, Toll Road Revenue
Bonds, 0.00%, 1/1/27 7,494,312
Baa3 NR 4,940 San Joaquin Hills
Transportation Corridor
Agency, Toll Road Revenue
Bonds, 7.00%, 1/1/30 5,531,516
Baa3 NR 12,000 San Joaquin Hills, CA,
Transportation Corridor
Agency, Toll Road Revenue
Bonds, 0.00%, 1/1/14 5,181,120
Baa3 NR 5,765 San Joaquin Hills, CA,
Transportation Corridor
Agency, Toll Road Revenue
Bonds, 0.00%, 1/1/26 1,267,147
Baa2 NR 1,500 Stockton Port District,
7.95%, 1/1/05 1,545,255
Baa2 NR 1,500 Stockton Port District,
8.10%, 1/1/14 1,545,810
- --------------------------------------------------------------------------------
$ 27,950,789
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
35
<PAGE>
California Municipals Portfolio as of September 30, 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>
Water and Sewer -- 1.3%
- --------------------------------------------------------------------------------
Aa AA $ 4,425 Orange County Water
District, 5.00%, 8/15/18 $ 4,194,104
- --------------------------------------------------------------------------------
$ 4,194,104
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $288,296,835) $325,532,574
- --------------------------------------------------------------------------------
</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 California
municipalities. The ability of the issuers of the debt securities to meet
their obligations may be affected by economic developments in a specific
industry or municipality. In order to reduce the risk associated with
such economic developments, at September 30, 1997, 23.7% 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 0.5% to 14.3% 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
36
<PAGE>
Florida Municipals Portfolio as of September 30, 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 -- 1.4%
- --------------------------------------------------------------------------------
NR NR $ 3,100 Palm Beach County, FL,
Okeelanta Power L.P.
(AMT), 6.85%, 2/15/21 $ 1,550,000
NR NR 11,000 Palm Beach County, FL,
Osceola Power (AMT),
6.95%, 1/1/22 5,390,000
- --------------------------------------------------------------------------------
$ 6,940,000
- --------------------------------------------------------------------------------
Education -- 1.2%
- --------------------------------------------------------------------------------
NR AAA $ 5,500 Volusia County
Educational Facilities,
(Embry-Riddle
Aeronautical University)
(CLEE), 6.625%, 10/15/22 $ 6,047,855
- --------------------------------------------------------------------------------
$ 6,047,855
- --------------------------------------------------------------------------------
Electric Utilities -- 7.4%
- --------------------------------------------------------------------------------
Aa1 AA $14,000 Jacksonville Electric
Authority, Bulk Power
Supply System Scherer 4,
5.25%, 10/1/21 $ 13,645,799
Aa1 AA 2,850 Orlando Utilities
Commission Water and
Electric, 5.125%, 10/1/19 2,753,357
Aa AA- 10,000 Orlando Utilities
Commission Water and
Electric, 5.60%, 10/6/17 10,064,000
Baa1 BBB+ 5,000 Puerto Rico Electric
Power Authority, 6.25%,
7/1/17 5,322,500
Baa1 BBB+ 185 Puerto Rico Electric
Power Authority, 7.125%,
7/1/14 197,560
Aa3 AA- 2,515 St. Lucie County Solid
Waste Disposal, (Florida
Power & Light Co.) (AMT),
6.70%, 5/1/27 2,716,955
NR NR 1,925 Virgin Islands Water and
Sewer Authority, 7.40%,
7/1/11 2,081,406
- --------------------------------------------------------------------------------
$ 36,781,577
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 8.7%
- --------------------------------------------------------------------------------
Aaa AAA $ 9,225 Dade County, (Baptist
Hospital of Miami),
5.75%, 5/1/21 $ 9,595,661
NR NR 1,675 Florida Mid-Bay Bridge
Authority, 6.875%, 10/1/22 1,983,083
Aaa AAA 5,000 Florida Municipal Power
Agency Stanton II (AMBAC)
Variable
Rate, 10/1/20/(1)/ 6,112,500
A3 A 7,255 Hillsborough Capital
Improvement - Museum of
Science, 6.45%, 1/1/22 7,754,217
NR AAA 15,135 Illinois Development
Finance Authority,
(Regency Park at
Lincolnwood), 0.00%,
7/15/25 3,131,583
Aaa AAA 2,000 Orlando and Orange
County, Expressway
Authority (FGIC), 8.25%,
7/1/14 2,726,360
Aaa NR 20,755 Savannah, GA, Economic
Development Authority,
0.00%, 12/1/21 5,411,244
Aaa AAA 5,600 St. Lucie Utility System,
6.00%, 10/1/20 6,027,224
- --------------------------------------------------------------------------------
$ 42,741,872
- --------------------------------------------------------------------------------
General Obligations -- 13.0%
- --------------------------------------------------------------------------------
Aa2 AA+ $32,000 Florida Board of
Education,
4.75%, 6/1/22 $ 29,180,479
Aa2 AA+ 15,235 Florida Board of
Education,
5.00%, 6/1/20 14,519,106
Aa2 AA+ 8,000 Florida Board of General
Services, 6.60%, 7/1/17 8,868,000
NR BBB 5,700 Government of Guam,
5.40%, 11/15/18 5,594,037
Baa1 A 3,000 Puerto Rico Commonwealth,
6.50%, 7/1/23 3,312,600
Baa1 A 2,500 Puerto Rico Public
Building Authority,
6.00%, 7/1/12 2,538,300
- --------------------------------------------------------------------------------
$ 64,012,522
- --------------------------------------------------------------------------------
Hospitals -- 1.8%
- --------------------------------------------------------------------------------
NR BBB+ $ 3,600 Escambia County, Health
Facilities Authority
(Baptist Hospital, Inc.
and The Baptist Manor,
Inc.), 6.75%, 10/1/14 $ 3,870,036
NR AA+ 4,750 Jacksonville Health
Facilities Finance
Authority, St. Luke's
Hospital Association,
6.75%, 11/15/13 5,189,375
- --------------------------------------------------------------------------------
$ 9,059,411
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
37
<PAGE>
Florida Municipals Portfolio as of September 30, 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 -- 11.7%
- ------------------------------------------------------------------------------
Aaa NR $ 2,000 Broward County, FL,
Housing Finance
Authority, SFMR,
(AMT), (GNMA/FNMA),
6.10%, 10/1/19 $ 2,087,420
NR AAA 610 Broward County, Housing
Finance Authority, Single
Family, (GNMA) (AMT),
7.35%, 3/1/23 646,795
Aaa NR 2,005 Clay County, FL, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.55%, 3/1/28 2,118,804
NR AAA 1,300 Clay County, Health
Facilities Authority,
Multifamily (GNMA),
7.40%, 12/1/25 1,374,776
Aaa NR 1,015 Dade County, Health
Facilities Authority,
Single Family (AMT),
7.75%, 9/1/22 1,071,942
Aaa NR 290 Dade County, Health
Facilities Authority,
Single Family (GNMA),
7.10%, 9/1/13 305,924
NR AAA 5,850 Dade County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.70%, 10/1/28 6,204,218
Aaa NR 1,160 Dade County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 7.25%, 9/1/19 1,224,948
Aaa NR 2,500 Escambia County, FL,
Housing Finance
Authority, SF, (AMT),
5.80%, 10/1/19 2,524,300
Aaa AAA 4,535 Escambia County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.85%, 10/1/17 4,801,023
Aaa AAA 1,640 Escambia County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.90%, 10/1/21 1,755,538
Aaa AAA 1,920 Escambia County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.95%, 10/1/27 2,056,397
Aaa NR 2,540 Escambia County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 7.40%, 10/1/23 2,685,542
NR AAA 1,125 Florida Health Facilities
Authority, 6.35%, 6/1/14 1,180,485
Aa3 AA 2,500 Florida Health Facilities
Authority (AMT),
6.35%, 7/1/28 2,631,225
Aaa NR 800 Hillsborough County,
Health Facilities
Authority, Single
Family (GNMA), (AMT),
7.875%, 5/1/23 849,224
NR NR 3,405 North Miami, FL, Health
Care Facilities (The
Imperial Club),
9.25%, 1/1/13 3,867,331
NR AAA 6,205 Orange County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.60%, 4/1/28 6,559,119
NR AAA 7,295 Orange County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 6.85%, 10/1/27 7,595,408
NR AAA 1,695 Orange County, Health
Facilities Authority,
Single Family (GNMA),
(AMT), 7.375%, 9/1/24 1,801,005
Aaa NR 845 Palm Beach County, Health
Facilities Authority,
Single Family (GNMA),
7.60%, 3/1/23 898,700
Aaa NR 1,455 Polk County, Health
Facilities Authority,
Single Family (GNMA),
7.15%, 9/1/23 1,535,723
Baa BBB 1,400 Puerto Rico Commonwealth
Urban Renewal and Housing
Corp., 7.875%, 10/1/04 1,507,996
Aaa AAA 635 Puerto Rico Housing
Financial Corp. Single
Family (GNMA), 7.65%,
10/15/22 672,509
- ------------------------------------------------------------------------------
$ 57,956,352
- ------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 2.1%
- ------------------------------------------------------------------------------
NR NR $ 5,000 Osceola County, IDA,
Community Pooled Loan-93,
7.75%, 7/1/17 $ 5,289,800
Baa3 BBB- 4,500 Puerto Rico Port
Authority (American
Airlines) (AMT),
6.25%, 6/1/26 4,816,170
- ------------------------------------------------------------------------------
$ 10,105,970
- ------------------------------------------------------------------------------
Insured-Electric Utilities -- 2.7%
- ------------------------------------------------------------------------------
Aaa AAA $ 2,200 Commonwealth of Puerto
Rico Electric Power
Authority STRIPES
(FSA), Variable
Rate, 7/1/03/(1)/ $ 2,491,500
Aaa AAA 3,925 Commonwealth of Puerto
Rico, Electric Power
Authority, (MBIA),
0.00%, 7/1/17 1,441,496
Aaa AAA 1,540 Manatee County, Public
Utility (FGIC),
0.00%, 10/1/12 712,912
</TABLE>
See notes to financial statements
38
<PAGE>
Florida Municipals Portfolio as of September 30, 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 $ 6,500 Port Saint Lucie, FL,
(MBIA), 5.00%, 9/1/17 $ 6,284,850
Aaa AAA 2,200 Puerto Rico Electric
Power Authority, (FSA)
Variable Rate,
7/1/02/(1)/ 2,436,500
- --------------------------------------------------------------------------------
$ 13,367,258
- --------------------------------------------------------------------------------
Insured-General Obligations -- 1.4%
- --------------------------------------------------------------------------------
Aaa NR $ 7,000 Massachusetts State
Turnpike Authority,
(FGIC), 5.125%, 1/1/23 $ 6,981,730
- --------------------------------------------------------------------------------
$ 6,981,730
- --------------------------------------------------------------------------------
Insured-Hospitals -- 7.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 8,000 Charlotte County, Health
Care, Bon-Secours Health
System (FSA) Variable
Rate, 8/26/27/(1)/ $ 8,780,000
Aaa AAA 23,355 Jacksonville Health
Authority, Daughters of
Charity (MBIA), 5.00%,
11/15/15 22,702,694
Aaa AAA 2,000 Lee County, (Memorial
Hospital) (MBIA) Variable
Rate, 4/1/20/(1)/ 2,387,500
Aaa AAA 3,000 Orange County, Health
Facilities Authority
(MBIA) Variable
Rate, 10/29/21/(1)/ 3,607,500
- --------------------------------------------------------------------------------
$ 37,477,694
- --------------------------------------------------------------------------------
Insured-Housing -- 3.9%
- --------------------------------------------------------------------------------
Aaa AAA $ 970 Brevard County, Housing
Finance Authority, Single
Family (FSA), 7.00%,
3/1/13 $ 1,029,587
Aaa AAA 1,720 Duval County, Health
Facilities Authority,
Single Family (FGIC),
7.35%, 7/1/24 1,836,908
Aaa AAA 6,530 Florida Health Facilities
Authority, (Maitland Club
Apartments), (AMBAC),
(AMT), 6.875%, 8/1/26 7,054,228
Aaa AAA 3,000 Florida Health Facilities
Authority, Brittany of
Rosemont (AMBAC) (AMT),
6.875%, 8/1/26 3,240,840
Aaa AAA 3,000 Florida HFA, (MBIA),
(AMT), 5.90%, 7/1/29 3,058,290
Aaa AAA 2,675 Lee County, SCA
Multifamily (FSA) (AMT),
7.05%, 1/1/30 2,894,698
- --------------------------------------------------------------------------------
$ 19,114,551
- --------------------------------------------------------------------------------
Insured-Life Care -- 0.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 Alachua County Health
Facility, Mental Health
Services (CGIC), 7.75%,
7/1/10 $ 552,905
- --------------------------------------------------------------------------------
$ 552,905
- --------------------------------------------------------------------------------
Insured-Miscellaneous -- 0.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,000 Escambia County (MBIA),
7.20%, 1/1/15 $ 2,110,780
Aaa AAA 799 Osceola County,
Industrial Development
Authority, Community
Provider Pooled Loan
Program (CGIC), 7.75%,
7/1/10 859,133
- --------------------------------------------------------------------------------
$ 2,969,913
- --------------------------------------------------------------------------------
Insured-Solid Waste -- 0.3%
- --------------------------------------------------------------------------------
AAA AAA $ 1,500 St. John's County Solid
Waste Disposal (FGIC),
7.25%, 11/1/10 $ 1,645,650
- --------------------------------------------------------------------------------
$ 1,645,650
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 8.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 City of Jacksonville
(FGIC) (AMT), 0.00%,
10/1/10 $ 514,290
Aaa AAA 1,000 City of Jacksonville
(FGIC) (AMT), 0.00%,
10/1/11 484,000
Aaa AAA 2,000 City of Jacksonville
(FGIC) (AMT), 0.00%,
10/1/12 912,420
Aaa AAA 1,185 City of Opa-Locka (FGIC),
7.00%, 1/1/14 1,346,030
Aaa AAA 1,160 Dade County, FL,
Professional Sports
Franchise, (MBIA),
0.00%, 10/1/19 356,097
Aaa AAA 3,835 Dade, Professional Sports
Franchise (MBIA), 0.00%,
10/1/23 937,888
Aaa AAA 4,250 Lakeland, FL, Capital
Improvement Revenue,
(MBIA), 5.00%, 10/1/17 4,134,783
</TABLE>
See notes to financial statements
39
<PAGE>
Florida Municipals Portfolio as of September 30, 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-Special Tax Revenue (continued)
- --------------------------------------------------------------------------------
Aaa AAA $ 1,840 St. Petersburg, FL,
Excise Tax Revenue,
(FGIC), 5.00%, 10/1/16 $ 1,807,892
Aaa AAA 3,160 St. Petersburg, FL,
Excise Tax Revenue,
(FGIC), 5.00%, 10/1/16 3,047,314
Aaa AAA 2,000 Sunrise Public Facilities
(MBIA), 0.00%, 10/1/10 1,041,700
Aaa AAA 1,760 Sunrise Public Facilities
(MBIA), 0.00%, 10/1/12 814,757
Aaa AAA 2,840 Sunrise Public Facilities
(MBIA), 0.00%, 10/1/14 1,166,956
Aaa AAA 4,140 Sunrise Public Facilities
(MBIA), 0.00%, 10/1/16 1,512,425
Aaa AAA 2,525 Sunrise Public Facilities
(MBIA), 0.00%, 10/1/17 874,812
Aaa AAA 4,000 Sunrise, FL, Public
Facilities Revenue,
(MBIA), 0.00%, 10/1/15 1,554,360
Aaa AAA 2,770 Tampa, FL, Sports
Authority Revenue,
(MBIA), 5.25%, 1/1/17 2,766,427
Aaa AAA 11,500 Tampa, FL, Sports
Authority Revenue,
(MBIA), 5.25%, 1/1/17 11,485,164
Aaa AAA 2,000 Tampa, FL, Utility Tax
Revenue, (AMBAC),
0.00%, 10/1/18 650,480
Aaa AAA 6,800 Tampa, FL, Utility Tax
Revenue, (AMBAC),
0.00%, 4/1/19 2,144,244
Aaa AAA 5,000 Tampa, FL, Utility Tax
Revenue, (AMBAC),
0.00%, 10/1/19 1,534,900
Aaa AAA 4,000 Tampa, FL, Utility Tax
Revenue, (AMBAC),
0.00%, 10/1/20 1,155,960
- --------------------------------------------------------------------------------
$ 40,242,899
- --------------------------------------------------------------------------------
Insured-Transportation -- 9.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 3,475 Dade County Aviation
Facilities (MBIA) (AMT),
6.00%, 10/1/24 $ 3,607,293
Aaa AAA 4,000 Dade County Aviation
Facilities (MBIA) (AMT),
6.55%, 10/1/13 4,355,280
Aaa AAA 4,150 Dade County Aviation
Facilities (MBIA) (AMT),
6.60%, 10/1/22 4,518,064
Aaa AAA 1,710 Dade County Seaport,
(MBIA), 5.125%, 10/1/26 1,658,529
Aaa AAA 8,455 Florida State Turnpike
Authority (FGIC),
6.35%, 7/1/22 9,110,093
Aaa AAA 8,650 Greater Orlando, FL,
Aviation Authority,
(FGIC) (AMT),
6.375%, 10/1/21 9,313,801
Aaa AAA 9,100 Massachusetts State
Turnpike Authority
(MBIA),
5.00%, 1/1/20 8,907,899
Aaa AAA 2,910 State of Florida,
Department of
Transportation, (Right of
Way), (FGIC),
5.00%, 7/1/21 2,792,582
- --------------------------------------------------------------------------------
$ 44,263,541
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 4.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,500 Broward County, (AMBAC),
5.125%, 10/1/15 $ 2,469,050
Aaa AAA 2,000 City of Fort Myers
Utility (FGIC),
5.00%, 10/1/16 1,928,680
Aaa AAA 12,005 Dade County, FL,
Water and
Sewer System, (FGIC),
5.50%, 10/1/25 12,069,226
Aaa AAA 4,155 Sanford, FL, Water and
Sewer Revenue, (AMBAC),
4.50%, 10/1/21 3,635,002
- --------------------------------------------------------------------------------
$ 20,101,958
- --------------------------------------------------------------------------------
Life Care -- 1.5%
- --------------------------------------------------------------------------------
NR NR $ 6,895 Atlantic Beach, Fixed
Rate Improvement, (Fleet
Landing Project), 8.00%,
10/1/24 $ 7,489,142
- --------------------------------------------------------------------------------
$ 7,489,142
- --------------------------------------------------------------------------------
Nursing Homes -- 5.3%
- --------------------------------------------------------------------------------
NR NR $ 300 Broward County,
Industrial Development
Authority (Beverly
Enterprises - Florida,
Inc.), 9.80%, 11/1/10 $ 338,181
NR NR 430 Charlotte County,
Industrial Development
Authority (Beverly
Enterprises), 10.00%,
6/1/11 491,499
NR NR 6,520 Citrus County, Industrial
Development Authority
(Beverly Enterprises),
7.25%, 4/1/03 6,662,723
</TABLE>
See notes to financial statements
40
<PAGE>
Florida Municipals Portfolio as of September 30, 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>
Nursing Homes (continued)
- -----------------------------------------------------------------------------
NR AAA $ 4,285 Dade County, Industrial
Development Authority -
Club Care Center (GNMA),
6.60%, 1/20/18 $ 4,591,206
NR AAA 5,075 Dade County, Industrial
Development Authority -
Gramercy Park Nursing
Care (FHA), 6.60%, 8/1/23 5,492,571
NR NR 1,955 Highlands County,
Industrial Development
Authority,(Beverly
Enterprises - Florida,
Inc.), 9.25%, 7/1/07 2,194,233
Baa1 NR 3,750 Jacksonville Health -
(Cypress Village), 7.00%,
12/1/22 4,043,213
NR NR 360 Okaloosa County, FL,
(Beverly Enterprises),
10.75%, 10/1/03 371,974
NR NR 655 Orange County, Industrial
Development Authority,
(Beverly Enterprises),
9.25%, 8/1/10 736,364
NR NR 1,000 Winter Garden, (Beverly
Enterprises), 8.75%,
7/1/12 1,129,110
- -----------------------------------------------------------------------------
$ 26,051,074
- -----------------------------------------------------------------------------
Solid Waste -- 0.8%
- -----------------------------------------------------------------------------
A A- $ 3,605 Broward County, (Waste
Energy Co., L.P. North),
7.95%, 12/1/08 $ 3,929,594
- -----------------------------------------------------------------------------
$ 3,929,594
- -----------------------------------------------------------------------------
Special Tax Revenue -- 2.5%
- -----------------------------------------------------------------------------
A1 AA- $ 3,000 City of Orlando, 6.00%,
10/1/22 $ 3,111,450
Baa1 A 9,250 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/36 8,636,818
Baa1 A 700 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.50%, 7/1/36 704,011
- -----------------------------------------------------------------------------
$ 12,452,279
- -----------------------------------------------------------------------------
Transportation -- 4.3%
- -----------------------------------------------------------------------------
NR NR $10,140 Mid-Bay Bridge Authority,
6.125%, 10/1/22 $ 10,426,962
Aa2 AA+ 10,800 State of Florida,
Jacksonville
Transportation, 5.25%,
7/1/22 10,622,772
- -----------------------------------------------------------------------------
$ 21,049,734
- -----------------------------------------------------------------------------
Water and Sewer -- 0.5%
- -----------------------------------------------------------------------------
Baa1 BBB+ $ 2,500 Hillsborough County
Utility, 6.625%, 8/1/11 $ 2,687,725
- -----------------------------------------------------------------------------
$ 2,687,725
- -----------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $462,068,417) $494,023,206
- -----------------------------------------------------------------------------
</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 Florida
municipalities. The ability of the issuers of the debt securities to meet
their obligations may be affected by the economic developments in a
specific industry or municipality. In order to reduce the risk associated
with such economic developments, at September 30, 1997, 37.4% 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 insured by financial institutions
ranged from 2.3% to 12.7% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
See notes to financial statements
41
<PAGE>
Massachusetts Municipals Portfolio as of September 30, 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 -- 0.7%
- --------------------------------------------------------------------------
NR AAA $ 1,500 Massachusetts IFA
(Briscoe House) (FHA),
7.125%, 2/1/36 $ 1,709,655
- --------------------------------------------------------------------------
$ 1,709,655
- --------------------------------------------------------------------------
Education -- 3.6%
- --------------------------------------------------------------------------
Aa1 AA+ $ 1,625 Massachusetts Health and
Educational Facilities
Authority (HEFA) (Amherst
College), 6.80%, 11/1/21 $ 1,770,974
NR AAA 3,400 Massachusetts HEFA
(Merrimack College),
7.125%, 7/1/12 3,853,934
A1 A+ 250 Massachusetts HEFA (Tufts
University), 7.75%, 8/1/13 262,558
Baa3 BBB- 1,250 Massachusetts IFA, (Dana
Hall), 5.90%, 7/1/27 1,274,513
A1 NR 2,000 New England Educational
Loan Marketing Corp.,
(AMT), 6.90%, 11/1/09 2,216,680
- --------------------------------------------------------------------------
$ 9,378,659
- --------------------------------------------------------------------------
Electric Utilities -- 6.2%
- --------------------------------------------------------------------------
NR BBB $ 1,545 Guam Power Authority,
5.25%, 10/1/23 $ 1,475,475
Baa2 BBB+ 5,060 Massachusetts Municipal
Wholesale Electric Co.,
6.625%, 7/1/18 5,412,429
Baa2 BBB+ 3,500 Massachusetts Municipal
Wholesale Electric Co.,
6.75%, 7/1/11 3,769,570
Baa1 BBB+ 3,000 Puerto Rico Electric
Power Authority, 0.00%,
7/1/17 1,061,370
Baa1 BBB+ 13,055 Puerto Rico Electric
Power Authority, 0.00%,
7/1/17 4,618,728
- --------------------------------------------------------------------------
$ 16,337,572
- --------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.0%
- --------------------------------------------------------------------------
NR AAA $11,825 Massachusetts General
Obligations Federal
Assisted Housing, Section
8, 0.00%, 2/1/23 $ 2,432,284
NR NR 2,400 Massachusetts HEFA
(Fairview Care
Facilities), 10.25%,
1/1/21 2,894,424
- --------------------------------------------------------------------------
$ 5,326,708
- --------------------------------------------------------------------------
General Obligations -- 4.5%
- --------------------------------------------------------------------------
A1 A+ $ 3,400 Commonwealth of
Massachusetts, 5.00%,
1/1/12 $ 3,352,060
NR BBB 200 Government of Guam,
5.375%, 11/15/13 197,126
NR BBB 2,145 Government of Guam,
5.40%, 11/15/18 2,105,124
A1 A+ 3,015 Massachusetts Bay Transit
Authority, (MBTA),
5.50%, 3/1/21 3,020,427
A1 A+ 1,000 Massachusetts Bay Transit
Authority, (MBTA),
5.90%, 3/1/12 1,052,060
Aaa NR 1,700 Town of Nantucket,
6.80%, 12/1/11 1,896,945
A1 A+ 250 University of
Massachusetts Building
Authority, 7.20%, 5/1/04 285,083
- --------------------------------------------------------------------------
$ 11,908,825
- --------------------------------------------------------------------------
Hospitals -- 16.4%
- --------------------------------------------------------------------------
A1 A $ 3,000 Massachusetts HEFA
(Charlton Memorial
Hospital), 7.25%, 7/1/13 $ 3,285,480
Aa2 AA+ 2,000 Massachusetts HEFA
(Daughters of Charity
Health System),
6.10%, 7/1/14 2,119,320
NR A- 1,020 Massachusetts HEFA
(Jordan Hospital),
6.875%, 10/1/15 1,107,842
NR A- 2,870 Massachusetts HEFA
(Jordan Hospital),
6.875%, 10/1/22 3,110,563
Baa3 BB+ 5,500 Massachusetts HEFA
(Milford-Whitinsville
Hospital), 7.75%, 7/15/17 6,014,635
Baa1 BBB+ 2,000 Massachusetts HEFA (New
England Baptist
Hospital), 7.35%, 7/1/17 2,162,340
NR BBB- 2,600 Massachusetts HEFA (North
Adams Regional Hospital),
6.625%, 7/1/18 2,733,406
Baa2 BBB 5,255 Massachusetts HEFA
(Sisters of Providence
Health System), 6.50%,
11/15/08 5,538,770
Baa2 BBB 2,085 Massachusetts HEFA
(Sisters of Providence
Health System), 6.625%,
11/15/22 2,203,470
A1 AA- 530 Massachusetts HEFA
(Spaulding Rehabilitation
Hospital), 7.625%, 7/1/21 552,965
</TABLE>
See notes to financial statements
42
<PAGE>
Massachusetts Municipals Portfolio as of September 30, 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)
- --------------------------------------------------------------------------
NR AA $ 1,475 Massachusetts HEFA,
(FHA), (Deutsches
Altenheim), 7.70%, 11/1/31 $ 1,594,696
NR NR 8,000 Massachusetts IFA,
0.00%, 8/1/08 4,574,640
NR NR 9,000 Massachusetts IFA
(Biomedical Research
Corp.), 0.00%, 8/1/09 4,831,650
NR NR 6,000 Massachusetts IFA
(Biomedical Research
Corp.), 0.00%, 8/1/10 3,018,240
- --------------------------------------------------------------------------
$ 42,848,017
- --------------------------------------------------------------------------
Housing -- 10.4%
- --------------------------------------------------------------------------
NR AAA $ 2,750 Framingham Housing
Authority, (GNMA), 6.65%,
2/20/32 $ 2,880,323
A1 A+ 5,000 Massachusetts HFA,
6.375%, 4/1/21 5,244,100
Aa A+ 7,160 Massachusetts HFA, (AMT),
6.60%, 12/1/26 7,562,177
Aa A+ 6,365 Massachusetts HFA, (AMT),
6.60%, 12/1/26 6,722,522
Aa A+ 2,195 Massachusetts HFA, (AMT),
8.10%, 6/1/20 2,258,304
Aa A+ 1,500 Massachusetts HFA, (AMT),
8.10%, 12/1/21 1,548,750
Aaa AAA 1,000 Massachusetts HFA,
(FNMA), 6.875%, 11/15/11 1,084,630
- --------------------------------------------------------------------------
$ 27,300,806
- --------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 3.6%
- --------------------------------------------------------------------------
NR NR $ 2,075 Massachusetts IFA
(Hingham Water Co.),
(AMT), 6.60%, 12/1/15 $ 2,227,865
NR NR 3,000 Massachusetts IFA
(Hingham Water Co.),
(AMT), 6.90%, 12/1/29 3,261,060
Baa3 BBB- 3,750 Puerto Rico Port
Authority (American
Airlines), (AMT), 6.25%,
6/1/26 4,013,475
- --------------------------------------------------------------------------
$ 9,502,400
- --------------------------------------------------------------------------
Insured-Colleges and Universities -- 0.4%
- --------------------------------------------------------------------------
Aaa AAA $ 1,000 Massachusetts HEFA,
(Berklee College of
Music), (MBIA),
5.10%, 10/1/27 $ 958,540
- --------------------------------------------------------------------------
$ 958,540
- --------------------------------------------------------------------------
Insured-Education -- 1.2%
- --------------------------------------------------------------------------
Aaa AAA $ 1,950 Massachusetts Educational
Finance Authority,
(AMBAC), (AMT), 7.30%,
1/1/12 $ 2,109,647
Aaa AAA 290 Massachusetts Educational
Finance Authority,
(MBIA), (AMT),
7.25%, 1/1/09 312,095
Aaa AAA 400 Massachusetts HEFA
(Boston University)
"RIBS", (MBIA), Variable
Rate, 10/1/31/(1)/ 468,500
Aaa AAA 250 Massachusetts HEFA
(Northeastern
University), (AMBAC),
7.50%, 10/1/08 263,398
- --------------------------------------------------------------------------
$ 3,153,640
- --------------------------------------------------------------------------
Insured-Electric Utilities -- 0.7%
- --------------------------------------------------------------------------
Aaa AAA $ 2,000 Massachusetts Municipal
Wholesale Electric Co.,
(MBIA), 4.75%, 7/1/10 $ 1,940,280
- --------------------------------------------------------------------------
$ 1,940,280
- --------------------------------------------------------------------------
Insured-General Obligations -- 1.4%
- --------------------------------------------------------------------------
Aaa AAA $ 1,795 City of Boston, (FSA),
4.875%, 9/1/09 $ 1,796,687
NR AAA 1,000 Commonwealth of Puerto
Rico "RIBS" (AMBAC),
Variable Rate 7/1/15/(1)/ 1,090,000
Aaa AAA 600 Town of Tyngsborough,
(AMBAC), 6.90%, 5/15/08 669,714
- --------------------------------------------------------------------------
$ 3,556,401
- --------------------------------------------------------------------------
Insured-Hospitals -- 8.5%
- --------------------------------------------------------------------------
Aaa AAA $ 300 Massachusetts HEFA
(Berkshire Health
Systems), (MBIA),
7.60%, 10/1/14 $ 316,827
</TABLE>
See notes to financial statements
43
<PAGE>
Massachusetts Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------
Insured-Hospitals (continued)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa AAA $ 3,750 Massachusetts HEFA (Beth
Israel Hospital),
(AMBAC), (AMT), Variable
Rate 7/1/25/(1)/ $ 4,082,813
Aaa AAA 1,040 Massachusetts HEFA
(Beverly Hospital),
(MBIA), 7.30%, 7/1/13 1,111,708
Aaa AAA 1,500 Massachusetts HEFA
(Capital Assist Program),
(MBIA), 7.20%, 7/1/09 1,602,240
Aaa AAA 1,885 Massachusetts HEFA
(Fallon Healthcare
System), (FSA),
6.75%, 6/1/20 /(2)/ 2,078,778
Aaa AAA 2,000 Massachusetts HEFA (St.
Elizabeth Hospital Issue)
"LEVRRS", (FSA), Variable
Rate 8/12/21/(1)/ 2,340,000
Aaa AAA 2,600 Massachusetts HEFA (St.
Luke's Hospital) "Yield
Curve Notes", (MBIA),
Variable Rate 8/15/13/(1)/ 2,756,000
Aaa AAA 2,600 Massachusetts HEFA (St.
Luke's Hospital) "Yield
Curve Notes", Variable
Rate, (MBIA), 8/15/23/(1)/ 2,700,750
Aaa AAA 3,000 Massachusetts HEFA (The
Medical Center of Central
Massachusetts) (AMBAC),
"CARS", Variable
Rate 6/23/22/(1)/ 3,618,750
Aaa AAA 700 Massachusetts HEFA
(University Hospital),
(MBIA), 7.25%, 7/1/19 763,546
Aaa AAA 1,000 Massachusetts HEFA,
(Lowell General
Hospital), Series B,
(FSA), 5.25%, 6/1/16 983,570
- --------------------------------------------------------------------------
$ 22,354,982
- --------------------------------------------------------------------------
Insured-Housing -- 0.6%
- --------------------------------------------------------------------------
Aaa AAA $ 1,500 Massachusetts HFA,
(AMBAC), 6.45%, 1/1/36 $ 1,586,565
- --------------------------------------------------------------------------
$ 1,586,565
- --------------------------------------------------------------------------
Insured-Life Care -- 0.9%
- --------------------------------------------------------------------------
Aaa AAA $ 2,465 Massachusetts HEFA,
(Partners Healthcare),
(MBIA), 5.375%, 7/1/17 $ 2,448,485
- --------------------------------------------------------------------------
$ 2,448,485
- --------------------------------------------------------------------------
Insured-Transportation -- 5.5%
- --------------------------------------------------------------------------
Aaa AAA $ 5,860 Massachusetts Port
Authority, (AMT), (FGIC),
7.50%, 7/1/20 $ 6,397,538
Aaa NR 26,970 Massachusetts Turnpike
Authority, (MBIA),
0.00%, 1/1/28 5,162,867
Aaa NR 2,970 Massachusetts Turnpike
Authority, (MBIA),
5.00%, 1/1/37 2,749,775
- --------------------------------------------------------------------------
$ 14,310,180
- --------------------------------------------------------------------------
Insured-Water and Sewer -- 0.9%
- --------------------------------------------------------------------------
Aaa AAA $ 2,500 Massachusetts Water
Resources Authority,
(MBIA), 4.75%, 12/1/21 $ 2,266,275
- --------------------------------------------------------------------------
$ 2,266,275
- --------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 3.8%
- --------------------------------------------------------------------------
NR A- $ 7,800 Plymouth County, MA
(Plymouth County
Correctional Facility),
7.00%, 4/1/22 $ 8,733,738
NR BBB 1,200 Puerto Rico Industrial,
Tourist, Educational,
Medical and
Environmental Control
Authority (Guaynabo
Municipal Government
Center Lease),
5.625%, 7/1/22 1,201,320
- --------------------------------------------------------------------------
$ 9,935,058
- --------------------------------------------------------------------------
Life Care -- 0.8%
- --------------------------------------------------------------------------
NR AAA $ 2,000 Boston, MA, Industrial
Development Financing
Authority, 6.00%, 2/1/37 $ 2,056,140
- --------------------------------------------------------------------------
$ 2,056,140
- --------------------------------------------------------------------------
Nursing Homes -- 1.3%
- --------------------------------------------------------------------------
NR NR $ 3,225 Massachusetts IFA (Age
Institute
of Massachusetts),
8.05%, 11/1/25 $ 3,405,439
- --------------------------------------------------------------------------
$ 3,405,439
- --------------------------------------------------------------------------
Solid Waste -- 0.5%
- --------------------------------------------------------------------------
NR NR $ 1,145 City of Pittsfield,
Vicon Recovery
Associates,
7.95%, 11/1/04 $ 1,193,285
- --------------------------------------------------------------------------
$ 1,193,285
- --------------------------------------------------------------------------
</TABLE>
See notes to financial statements
44
<PAGE>
Massachusetts Municipals Portfolio as of September 30, 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 -- 3.5%
- --------------------------------------------------------------------------
Baa1 A $ 3,300 Commonwealth of Puerto
Rico Highway and
Transportation Authority,
5.00%, 7/1/36 $ 3,081,243
Aa3 AA 3,500 State of Massachusetts,
5.00%, 6/1/17 3,372,425
NR NR 2,350 Virgin Islands Public
Finance Authority,
7.25%, 10/1/18 2,624,856
- --------------------------------------------------------------------------
$ 9,078,524
- --------------------------------------------------------------------------
Transportation -- 12.0%
- --------------------------------------------------------------------------
NR BBB $ 5,950 Guam Airport Authority,
(AMT), 6.70%, 10/1/23 $ 6,450,871
Aa3 AA- 3,000 Massachusetts Port
Authority, (AMT),
5.375%, 7/1/27 2,915,190
A1 NR 22,535 Massachusetts Turnpike
Authority, 5.00%, 1/1/20 22,059,285
- --------------------------------------------------------------------------
$ 31,425,346
- --------------------------------------------------------------------------
Water and Sewer -- 10.6%
- --------------------------------------------------------------------------
Baa1 BBB $12,185 City of Boston (Harbor
Electric Energy Co.),
(AMT), 7.375%, 5/15/15 $ 13,281,283
A2 A 7,175 Massachusetts Water
Resources Authority,
5.00%, 3/1/22 6,704,894
A2 A 1,500 Massachusetts Water
Resources Authority,
5.25%, 3/1/13 1,495,230
A2 A 4,165 Massachusetts Water
Resources Authority,
5.25%, 12/1/15 4,174,371
NR NR 2,000 Virgin Islands Water and
Power Authority,
7.60%, 1/1/12 2,238,140
- --------------------------------------------------------------------------
$ 27,893,918
- --------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $238,584,146) $261,875,700
- --------------------------------------------------------------------------
</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 Massachusetts
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by the economic developments in a specific industry
or municipality. In order to reduce the risk associated with such economic
developments, at September 30, 1997, 20.1% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institutions ranged from 2.4% to 9.8% 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
45
<PAGE>
Mississippi Municipals Portfolio as of September 30, 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 -- 2.3%
- --------------------------------------------------------------------------------
NR A $ 470 University of Mississippi
Educational Building
Athletic Facility,
6.20%, 6/1/16 $ 503,699
- --------------------------------------------------------------------------------
$ 503,699
- --------------------------------------------------------------------------------
Electric Utilities -- 9.1%
- --------------------------------------------------------------------------------
NR BBB $ 810 Guam Power Authority,
6.625%, 10/1/14 $ 878,874
Baa3 NR 1,000 Warren County (Mississippi
Power & Light Co.), 7.00%,
4/1/22 1,099,630
- --------------------------------------------------------------------------------
$ 1,978,504
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 5.6%
- --------------------------------------------------------------------------------
A NR $ 600 Mississippi Hospital
Equipment and Facilities
Authority, (Rankin Medical
Center), 5.60%, 3/1/19 $ 646,158
Aaa NR 1,500 Mississippi Housing Finance
Corp., Single Family,
(AMT), 0.00%, 6/1/15 577,560
- --------------------------------------------------------------------------------
$ 1,223,718
- --------------------------------------------------------------------------------
General Obligations -- 3.6%
- --------------------------------------------------------------------------------
Aa3 AA $ 200 State of Mississippi,
5.10%, 11/15/12 $ 203,776
Aa3 NR 500 State of Mississippi,
6.75%, 12/1/14 570,450
- --------------------------------------------------------------------------------
$ 774,226
- --------------------------------------------------------------------------------
Hospitals -- 2.1%
- --------------------------------------------------------------------------------
Baa3 BBB $ 450 Mississippi Hospital
Equipment and Facilities
Authority, (Rush Medical
Foundation Project), 6.00%,
1/1/22 $ 450,500
- --------------------------------------------------------------------------------
$ 450,500
- --------------------------------------------------------------------------------
Housing -- 14.0%
- --------------------------------------------------------------------------------
Aa NR $ 500 Hinds County, Woodridge
Apartments, (FHA), 6.25%,
11/1/27 $ 523,490
Aaa NR 500 Mississippi Home Corp.,
Single Family, (AMT),
(GNMA), 6.625%, 4/1/27 530,560
Aaa NR 415 Mississippi Home Corp.,
Single Family, Access
Program, (AMT), (GNMA),
8.10%, 12/1/24 463,480
Aaa NR 870 Mississippi Home Corp.,
Single Family, Access
Program, (AMT), (GNMA),
8.125%, 12/1/24 969,650
Aaa NR 500 Mississippi Home Corp.,
Single Family, Access
Program, (GNMA), (AMT),
6.00%, 12/1/27 565,535
- --------------------------------------------------------------------------------
$ 3,052,715
- --------------------------------------------------------------------------------
Industrial Development Revenue / Pollution Control
Revenue -- 13.3%
- --------------------------------------------------------------------------------
A2 A $1,000 Lowndes County
(Weyerhaeuser Co.), 6.80%,
4/1/22 $ 1,180,610
NR AA- 500 Mississippi Business
Finance Corp., (AMT),
7.15%, 5/1/16/(1)/ 547,950
Baa3 BBB- 490 Puerto Rico Port Authority
(American Airlines), (AMT),
6.25%, 6/1/26 524,427
A3 A- 600 Warren County
(International Paper Co.),
(AMT), 6.60%, 3/1/19 653,706
- --------------------------------------------------------------------------------
$ 2,906,693
- --------------------------------------------------------------------------------
Insured-Education -- 5.1%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Mississippi Educational
Facilities Authority,
(Milsaps College), (MBIA),
6.50%, 11/1/19 $ 1,119,190
- --------------------------------------------------------------------------------
$ 1,119,190
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 5.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Jackson County, Gautier
Utility District, (MBIA),
6.375%, 3/1/12 $ 813,983
Aaa AAA 300 Puerto Rico, Electric Power
Authority (FSA) Variable
Rate, 7/1/03/(2)/ 339,750
- --------------------------------------------------------------------------------
$ 1,153,733
- --------------------------------------------------------------------------------
Insured-General Obligations -- 7.0%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Desoto County School
District, (MBIA), 4.75%,
2/1/13 $ 953,790
Aaa AAA 500 Hinds County, (MBIA),
6.25%, 3/1/11 566,845
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
46
<PAGE>
Mississippi Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited) Principal
- ------------------- Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-General Obligations (continued)
- --------------------------------------------------------------------------------
$ 1,520,635
- --------------------------------------------------------------------------------
Insured-Hospitals -- 14.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 City of Gulfport (Gulfport
Memorial Hospital), (MBIA),
6.20%, 7/1/18 $ 1,066,610
Aaa AAA 1,275 Hinds County (Mississippi
Methodist Hospital),
(AMBAC), 5.60%, 5/1/12 1,362,376
Aaa AAA 200 Mississippi Development
Bank (Adams County
Hospital), 5.75%, 7/1/16 208,286
Aaa AAA 500 Mississippi Hospital
Equipment and Facilities
Authority (Mississippi
Baptist Medical Center),
(MBIA), 6.00%, 5/1/13 533,370
- --------------------------------------------------------------------------------
$ 3,170,642
- --------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of Participation -- 3.6%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Medical Center Building
Corp., (University of
Mississippi Medical
Center), (MBIA), 5.80%,
12/1/14 $ 786,105
- --------------------------------------------------------------------------------
$ 786,105
- --------------------------------------------------------------------------------
Insured-Water and Sewer -- 2.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 City of Natchez, Combined
Water and Sewer System,
(MBIA), 5.70%, 8/1/17 $ 514,460
- --------------------------------------------------------------------------------
$ 514,460
- --------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 9.6%
- --------------------------------------------------------------------------------
NR A $1,000 Mississippi Development
Bank, Golden Triangle Solid
Waste, 6.00%, 7/1/15 $ 1,037,500
A2 NR 1,000 Mississippi University
Educational Building Corp.,
Facilities Renovation,
6.15%, 6/15/15 1,058,960
- --------------------------------------------------------------------------------
$ 2,096,460
- --------------------------------------------------------------------------------
Life Care -- 1.0%
- --------------------------------------------------------------------------------
NR NR $ 200 Ridgeland, MS, Urban
Renewal, The Orchard
Project Series 1993A,
7.75%, 12/1/15 $ 214,032
- --------------------------------------------------------------------------------
$ 214,032
- --------------------------------------------------------------------------------
Nursing Homes -- 1.4%
- --------------------------------------------------------------------------------
NR NR $ 300 Mississippi Business
Finance Corp. (Magnolia
Healthcare), 7.99%, 7/1/25 $ 314,145
- --------------------------------------------------------------------------------
$ 314,145
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $19,751,773) $21,779,457
- --------------------------------------------------------------------------------
</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 Mississippi
municipalities. The ability of the issuers of the debt securities to meet
their obligations may be affected by the economic developments in a
specific industry or municipality. In order to reduce the risk associated
with such economic developments, at September 30, 1997, 38.0% of the
securities in the portfolio of investments are backed by bond insurance
of various financial institutions and financial guaranty assurance
agencies. The aggregate percentage insured by financial institutions
ranged from 2.5% to 25.4% 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.
See notes to financial statements
47
<PAGE>
New York Municipals Portfolio as of September 30, 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>
Airlines -- 0.6%
- --------------------------------------------------------------------------------
Baa3 BBB- $ 2,800 Port Authority of New York and
New Jersey, (Delta Airlines),
6.95%, 6/1/08 $ 3,053,176
- --------------------------------------------------------------------------------
$ 3,053,176
- --------------------------------------------------------------------------------
Assisted Living -- 1.2%
- --------------------------------------------------------------------------------
NR NR $ 4,000 Glen Cove, IDA, 9.50%, 7/1/12 $ 4,000,000
NR NR 1,970 Village of North Syracuse, NY,
Housing Authority (AJM Senior
Housing, Inc., Janus Park),
8.00%, 6/1/24 2,096,474
- --------------------------------------------------------------------------------
$ 6,096,474
- --------------------------------------------------------------------------------
Education -- 15.8%
- --------------------------------------------------------------------------------
Baa2 NR $ 1,660 City of New Rochelle IDA Civic
Facilities, (College of New
Rochelle), 6.75%, 7/1/22 $ 1,779,155
Aaa AA+ 6,895 Dormitory Authority, (Columbia
University), 4.75%, 7/1/14 6,462,270
NR AA 1,300 Dormitory Authority, (New York
Medical College) (Asset Guaranty),
6.875%, 7/1/21 1,426,464
A3 A- 9,850 Dormitory Authority, State
University Educational Facilities,
5.25%, 5/15/15 9,737,809
A3 A- 28,675 Dormitory Authority, State
University Educational Facilities,
5.25%, 5/15/19 28,056,766
A3 A- 14,680 Dormitory Authority, State
University Educational Facilities,
5.25%, 5/15/21 14,348,818
A3 A- 9,125 Dormitory Authority, State
University Educational Facilities,
5.50%, 5/15/13 9,365,535
A3 A- 2,000 Dormitory Authority, State
University Educational Facilities,
5.50%, 5/15/19 2,025,200
A3 A- 415 Dormitory Authority, State
University Educational Facilities,
7.375%, 5/15/14 452,342
A3 A- 1,300 Dormitory Authority, State
University Educational Facilities,
7.50%, 5/15/11 1,573,507
A NR 1,000 Dutchess County IDA, (Bard
College), 7.00%, 11/1/17 1,109,560
A1 NR 6,035 Monroe County IDA, (Wilmur
Assc.), 7.25%, 12/1/16 6,444,897
- --------------------------------------------------------------------------------
$ 82,782,323
- --------------------------------------------------------------------------------
Electric Utilities -- 3.7%
- --------------------------------------------------------------------------------
A1 A+ $ 2,365 New York State Energy Research
and Development Authority,
(Consolidated Edison) (AMT),
7.50%, 7/1/25 $ 2,500,751
A1 A 2,500 New York State Energy Research
and Development Authority,
(Brooklyn Union Gas), (RIBS),
(AMT), Variable Rate, 7/1/26/(1)/ 3,178,125
A1 A+ 1,000 New York State Energy Research
and Development Authority,
(Consolidated Edison) (AMT),
7.50%, 1/1/26 1,069,050
NR NR 5,450 New York State Energy Research
and Development Authority,
(LILCO) "RITES" (AMT),
Variable Rate, 8/1/22/(1)/ 6,267,500
Ba3 BB+ 3,110 New York State Energy Research
and Development Authority,
(LILCO), (AMT), 6.90%, 8/1/22 3,355,130
NR NR 2,885 Virgin Islands Water and Sewer
Authority, 7.40%, 7/1/11 3,119,406
- --------------------------------------------------------------------------------
$ 19,489,962
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 9.4%
- --------------------------------------------------------------------------------
Aaa BBB+ $ 1,000 Dormitory Authority, (City
University), 7.625%, 7/1/20 $ 1,110,200
Baa1 NR 2,250 Dormitory Authority,
(Upstate Community College),
7.20%, 7/1/21 2,517,480
Baa1 NR 2,000 Dormitory Authority,
(Upstate Community College),
7.30%, 7/1/21 2,244,640
Aaa AAA 500 Erie County Water Authority,
Water Works System, (AMBAC),
6.00%, 12/1/08 544,055
Aaa AAA 500 Metropolitan Transportation
Authority Commuter Facilities
Bonds, 7.50%, 7/1/19 551,250
</TABLE>
See notes to financial statements
48
<PAGE>
New York Municipals Portfolio as of September 30, 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>
Escrowed / Prerefunded (continued)
- --------------------------------------------------------------------------------
Aaa NR $ 1,300 New York City IDA,
(YMCA of Greater New
York), 8.00%, 8/1/16 $ 1,497,652
Aaa BBB+ 1,000 New York State (HFA),
Service Contracts, 7.80%,
9/15/01 1,132,920
Aaa AAA 110 New York State (MCFFA)
Mental Health Services
Facilities, 7.75%, 8/15/10 121,186
Aaa AAA 4,090 New York State (MCFFA),
Mental Health Services
Facilities, 7.50%, 2/15/21 4,589,962
Aa A 11,050 New York State
Environmental Facilities
Corporation (EFC),
State Water Pollution
Control, 6.875%, 6/15/10 12,187,487
Aaa AAA 1,775 New York State HFA,
Service Contracts,
7.375%, 9/15/21 2,026,340
Aaa AAA 345 New York State MCFFA,
Mental Health Services
Facilities, 7.875%,
8/15/08 386,448
Baa1 A- 1,090 New York State Medical
Care Facilities, 7.625%,
8/15/17 1,239,232
Baa1 BBB+ 4,750 New York State Thruway
Authority, Local Highway
and Bridge Service
Contract Bonds, 7.25%,
1/1/10/(2)/ 5,267,988
Baa1 BBB+ 500 New York State UDC,
Alfred Technology,
7.875%, 1/1/20 549,245
Baa1 BBB+ 750 New York State UDC,
Clarkson Center, 7.80%,
1/1/20 844,200
Baa1 BBB+ 750 New York State UDC,
Clarkson Center, 8.00%,
1/1/20 848,715
Aaa NR 5,100 New York State UDC,
Correctional Facilities,
6.50%, 1/1/21 5,467,965
Aaa BBB+ 3,685 New York, NY, 7.50%,
2/1/18 4,205,985
NR AAA 1,760 Puerto Rico Highway and
Transportation Authority
- Highway Revenue,
6.625%, 7/1/18 1,969,739
- --------------------------------------------------------------------------------
$ 49,302,689
- --------------------------------------------------------------------------------
General Obligations -- 0.8%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 315 New York, NY, 7.50%,
2/1/18 $ 352,806
Aa2 AA 1,700 Onondaga County, NY,
5.875%, 2/15/11 1,862,877
Aa2 AA 1,600 Onondaga County, NY,
5.875%, 2/15/12 1,751,696
- --------------------------------------------------------------------------------
$ 3,967,379
- --------------------------------------------------------------------------------
Healthcare -- 1.1%
- --------------------------------------------------------------------------------
NR NR $ 5,000 New York State Housing
Finance Agency, "RITES",
Variable Rate, 5/1/06/(1)/ $ 5,693,750
- --------------------------------------------------------------------------------
$ 5,693,750
- --------------------------------------------------------------------------------
Hospitals -- 13.9%
- --------------------------------------------------------------------------------
Aa2 AAA $ 1,500 Dormitory Authority,
(Long Island Jewish
Medical Center) (FHA),
7.75%, 8/15/27 $ 1,546,140
NR AAA 1,000 Dormitory Authority, (St.
Francis Hospital) (FHA),
7.65%, 8/1/30 1,112,880
Baa1 A- 7,300 Dormitory Authority,
Mental Health Facilities,
5.375%, 2/15/26 7,057,348
NR AAA 6,705 Dormitory Authority,
United Health Services,
(FHA), 7.35%, 8/1/29 7,318,977
Aa2 AAA 1,000 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
6.55%, 8/15/12 1,079,720
NR AA 9,000 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
6.70%, 8/15/23 9,726,390
Aa2 AA 1,050 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
6.75%, 2/15/12 1,135,229
Aa2 AA 1,500 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
6.95%, 2/15/32 1,636,485
Aa2 AA 2,190 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
7.00%, 8/15/32 2,405,693
Aa2 AA 6,600 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
7.25%, 2/15/31 7,271,946
Aa2 AA 740 New York State MCFFA,
Hospital and Nursing
Insured Mortgage (FHA),
7.35%, 2/15/29 784,548
Aa2 AA 950 New York State MCFFA,
Insured Mortgage (FHA),
7.45%, 8/15/31 1,044,563
Baa1 A- 460 New York State MCFFA,
Mental Health Services
Facilities, 7.50%, 2/15/21 510,494
Baa1 A- 35 New York State MCFFA,
Mental Health Services
Facilities, 7.75%, 8/15/10 38,237
</TABLE>
See notes to financial statements
49
<PAGE>
New York Municipals Portfolio as of September 30, 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)
- --------------------------------------------------------------------------------
Baa1 A- $ 150 New York State MCFFA, Mental
Health Services Facilities,
7.875%, 8/15/08 $ 166,785
Baa BBB+ 5,540 New York State MCFFA, Secured
Hospital, 7.35%, 8/15/11 6,083,529
Baa BBB+ 19,700 New York State MCFFA, Secured
Hospital (Brookdale), 6.80%,
8/15/12 21,548,253
Baa1 A- 490 New York State Medical Care
Facilities, 7.625%, 8/15/17 549,496
Baa1 BBB+ 1,800 Syracuse Industrial Development
Agency (IDA), St. Joseph's
Hospital Health Center, 7.50%,
6/1/18 2,028,510
- --------------------------------------------------------------------------------
$ 73,045,223
- --------------------------------------------------------------------------------
Housing -- 5.6%
- --------------------------------------------------------------------------------
NR NR $ 4,574 New York City HDC, Allerville,
6.50%, 11/15/18 $ 4,637,076
NR NR 2,006 New York City HDC, Dayton,
6.50%, 11/15/18 2,095,308
NR AAA 2,550 New York City HDC, Multi-Unit
Management, 7.35%, 6/1/19 2,720,009
Aa2 AAA 235 New York State Housing Finance
Agency, Baytown, 7.10%, 8/15/35 249,716
Aaa NR 31,145 New York State Mortgage Agency,
0.00%, 10/1/14 6,300,634
Aa2 NR 500 New York State Mortgage Agency,
6.65%, 4/1/22 528,565
Aa2 NR 8,750 New York State Mortgage Agency,
6.90%, 4/1/15 9,453,588
Aa2 NR 1,000 New York State Mortgage Agency,
7.50%, 4/1/15 1,077,150
Aa2 NR 1,600 New York State Mortgage Agency
(AMT), 7.95%, 10/1/21 1,705,792
Baa BBB 350 Puerto Rico Commonwealth Urban
Renewal and Housing Corp.,
7.875%, 10/1/04 376,999
Aaa AAA 300 Puerto Rico Housing Financial
Corp. Single Family (GNMA),
7.65%, 10/15/22 317,721
- --------------------------------------------------------------------------------
$ 29,462,558
- --------------------------------------------------------------------------------
Insured-Electric Utilities -- 1.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 5,000 Puerto Rico Telephone Authority
(MBIA) Variable Rate,
1/25/07/(1)/ $ 5,393,750
- --------------------------------------------------------------------------------
$ 5,393,750
- --------------------------------------------------------------------------------
Insured-General Obligations -- 2.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 700 Bethlehem Central School
District (AMBAC), 7.10%,
11/1/08 $ 847,896
Aaa AAA 700 Bethlehem Central School
District (AMBAC), 7.10%,
11/1/09 852,082
Aaa AAA 770 Chautauqua County Unlimited
Tax (FGIC), 6.40%, 9/15/09 887,163
Aaa AAA 1,035 Erie County Water Authority
(AMBAC), 0.00%, 12/1/17 244,508
Aaa AAA 700 Jamestown, (Secondary AMBAC),
7.10%, 3/15/09 846,132
Aaa AAA 700 Jamestown, (Secondary AMBAC),
7.10%, 3/15/10 849,639
Aaa AAA 700 Jamestown, (Secondary AMBAC),
7.10%, 3/15/11 853,552
Aaa AAA 675 Jamestown, (Secondary AMBAC),
7.10%, 3/15/12 826,342
Aaa AAA 675 Jamestown, (Secondary AMBAC),
7.10%, 3/15/13 829,238
Aaa AAA 515 Jamestown, (Secondary AMBAC),
7.10%, 3/15/14 634,341
Aaa AAA 1,930 New York, NY (AMBAC), 7.00%,
8/1/17 2,161,697
Aaa AAA 4,500 Puerto Rico (FSA), Variable
Rate, 7/1/22/(1)/ 4,944,375
- --------------------------------------------------------------------------------
$ 14,776,965
- --------------------------------------------------------------------------------
Insured-Hospitals -- 1.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,300 New York State MCFFA, New York
Hospital (FHA) (AMBAC), 6.60%,
2/15/11 $ 1,454,375
Aaa AAA 5,400 New York State MCFFA, New York
Hospital (FHA) (AMBAC), 6.75%,
8/15/14 6,072,948
- --------------------------------------------------------------------------------
$ 7,527,323
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
50
<PAGE>
New York Municipals Portfolio as of September 30, 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 -- 0.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 New York City HDC, Charter Oaks
(MBIA), 7.375%, 4/1/17 $ 512,585
- --------------------------------------------------------------------------------
$ 512,585
- --------------------------------------------------------------------------------
Insured-Life Care -- 0.3%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,500 New York State MCFFA,
Long Term Health Care
(FSA), 6.80%, 11/1/14 $ 1,657,545
- --------------------------------------------------------------------------------
$ 1,657,545
- --------------------------------------------------------------------------------
Insured-Miscellaneous -- 0.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 500 New York City IDA, (USTA
National Tennis Center Inc.)
(FSA), 6.375%, 11/15/14 $ 549,685
Aaa AAA 1,600 New York City Trust Cultural
Resources, (American Museum of
Natural History), (MBIA),
5.65%, 4/1/22 1,639,456
- --------------------------------------------------------------------------------
$ 2,189,141
- --------------------------------------------------------------------------------
Insured-Solid Waste -- 1.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,650 Dutchess County Resource
Recovery Solid Waste (FGIC),
7.50%, 1/1/09 $ 1,790,547
Aaa AAA 6,795 Islip Resource Recovery Agency
(MBIA), 6.50%, 7/1/09 7,657,286
- --------------------------------------------------------------------------------
$ 9,447,833
- --------------------------------------------------------------------------------
Insured-Transportation -- 3.8%
- --------------------------------------------------------------------------------
Aaa AAA $ 6,000 Metropolitan Transportation
Authority, NY, (MBIA),
5.00%, 7/1/20 $ 5,740,260
Aaa AAA 3,000 Triborough Bridge and Tunnel
Authority of New York, "RITES"
(AMBAC), Variable
Rate, 1/1/12/(1)/ 3,420,000
NR AAA 3,000 Triborough Bridge and Tunnel
Authority, (MBIA), Variable
Rate, 1/1/19/(1)/ 3,180,000
NR NR 7,000 VRDC-IVRC Trust,
(NY MTA), Variable Rate,
(MBIA), 6/26/02/(1)/ 7,551,250
- --------------------------------------------------------------------------------
$ 19,891,510
- --------------------------------------------------------------------------------
Lease Revenue/Certificates of Participation -- 13.6%
- --------------------------------------------------------------------------------
Baa1 BBB+ $ 8,000 Dormitory Authority, (City
University), 5.625%, 7/1/16 $ 8,267,280
Baa1 BBB+ 250 Dormitory Authority, (City
University), 6.375%, 7/1/08 267,105
Baa1 BBB+ 5,100 Dormitory Authority, (City
University), 7.00%, 7/1/09 5,894,325
Baa1 BBB+ 4,325 Dormitory Authority, (City
University), 7.50%, 7/1/10 5,234,418
Baa1 BBB+ 1,000 Dormitory Authority, City
University, (Cross-over
Refunded '98), 8.125%, 7/1/08 1,047,990
Baa1 BBB 8,500 New York State Dormitory
Authority, (City University),
6.00%, 7/1/20 9,162,660
Baa BBB+ 3,380 New York State HFA Health
Facilities, 6.00%, 5/1/06 3,613,457
NR BBB 5,865 New York State Thruway Authority,
0.00%, 1/1/01 5,053,695
NR BBB 2,350 New York State Thruway Authority,
0.00%, 1/1/03 1,833,611
Baa1 BBB+ 27,940 New York State UDC,
5.70%, 4/1/20 28,987,190
A A 1,825 Syracuse-Hancock International
Airport, 6.625%, 1/1/12 1,943,589
- --------------------------------------------------------------------------------
$ 71,305,320
- --------------------------------------------------------------------------------
Miscellaneous -- 0.5%
- --------------------------------------------------------------------------------
Aa2 AA $ 635 City of New York
Municipal Assistance Corp.,
7.625%, 7/1/08 $ 686,683
Aaa AAA 1,830 New York City, IDA (Rockefeller
Foundation), 5.375%, 7/1/23 1,808,461
- --------------------------------------------------------------------------------
$ 2,495,144
- --------------------------------------------------------------------------------
Solid Waste -- 1.9%
- --------------------------------------------------------------------------------
Baa1 NR $ 9,530 New York State EFC
Resource Recovery, Huntington,
7.50%, 10/1/12 $ 10,178,707
- --------------------------------------------------------------------------------
$ 10,178,707
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
51
<PAGE>
New York Municipals Portfolio as of September 30, 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 -- 10.0%
- --------------------------------------------------------------------------------
A3 A+ $ 5,000 New York State LGAC,
5.00%, 4/1/21 $ 4,691,250
A3 A+ 14,000 New York State LGAC,
5.00%, 4/1/21 13,313,019
A3 A+ 11,170 New York State LGAC,
5.00%, 4/1/23 10,452,551
A3 A+ 12,300 New York State LGAC,
5.375%, 4/1/19 12,168,636
A3 A+ 5,225 New York State LGAC,
5.50%, 4/1/17 5,383,265
NR BBB+ 2,630 New York State Municipal Bond
Bank Agency, 6.875%, 3/15/06 2,850,263
Baa1 BBB+ 3,335 Triborough Bridge and Tunnel
Authority, Convention Center,
6.00%, 1/1/11 3,601,200
- --------------------------------------------------------------------------------
$ 52,460,184
- --------------------------------------------------------------------------------
Transportation -- 3.9%
- --------------------------------------------------------------------------------
A1 AA- $ 1,500 Port Authority of New York and
New Jersey (AMT), Variable
Rate, 1/15/27/(1)/ $ 1,644,375
Aa A+ 3,500 Triborough Bridge and Tunnel
Authority, 5.20%, 1/1/27 3,387,335
Aa A+ 11,580 Triborough Bridge and Tunnel
Authority, 5.50%, 1/1/17 12,034,283
Aa A+ 3,000 Triborough Bridge and Tunnel
Authority, 6.125%, 1/1/21 3,362,880
- --------------------------------------------------------------------------------
$ 20,428,873
- --------------------------------------------------------------------------------
Water and Sewer -- 6.4%
- --------------------------------------------------------------------------------
A2 A- $11,200 New York City, NY, Municipal
Water Finance Authority,
5.25%, 6/15/29 $ 10,781,008
A2 A- 14,500 New York City, NY, Municipal
Water Finance Authority,
5.75%, 6/15/26 14,765,494
Aa2 A+ 4,545 New York State EFC, State
Water Pollution Control,
7.20%, 3/15/11 4,918,917
Aa A 150 New York State EFC, State
Water Pollution Control,
7.50%, 6/15/12 165,786
Aa2 A $ 2,750 New York State EFC, State Water
Pollution Control, (partially
refunded), 7.00%, 6/15/12 $ 3,058,798
- --------------------------------------------------------------------------------
$ 33,690,003
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $481,258,800) $524,848,417
- --------------------------------------------------------------------------------
</TABLE>
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
The Portfolio invests primarily in debt securities issued by New York
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at September 30, 1997, 10.4% 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 insured by
financial institution ranged from 0.5% to 4.6% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
52
<PAGE>
Ohio Municipals Portfolio as of September 30, 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 -- 0.8%
- --------------------------------------------------------------------------------
Aa3 AA $ 1,500 Ohio State Higher Educational
Facilities, (Case Western
University), 5.125%, 10/1/17 $ 1,467,870
Aa AA 550 Ohio State Higher Educational
Facilities, (Case Western
University), 6.50%, 10/1/20 648,582
- --------------------------------------------------------------------------------
$ 2,116,452
- --------------------------------------------------------------------------------
Education -- 4.2%
- --------------------------------------------------------------------------------
A1 NR $ 6,000 Ohio State Student Loan Funding
Corp (AMT), 6.10%, 8/1/07 $ 6,168,060
A1 NR 5,000 Ohio State Student Loan Funding
Corp (AMT), 6.10%, 8/1/08 5,115,050
- --------------------------------------------------------------------------------
$ 11,283,110
- --------------------------------------------------------------------------------
Electric Utilities -- 3.6%
- --------------------------------------------------------------------------------
A1 A+ $ 1,185 Ohio State Air Quality Development
Authority, 6.10%, 9/1/30 $ 1,241,051
Ba1 BB+ 7,000 Ohio State Water Development
Authority, Pollution Control
Facilities, (Cleveland Electric),
(AMT), 6.10%, 8/1/20 7,117,390
Baa1 BBB+ 360 Puerto Rico Electric Power
Authority, 7.125%, 7/1/14 384,440
NR NR 960 Virgin Islands Water and Sewer
Authority, 7.40%, 7/1/11 1,038,000
- --------------------------------------------------------------------------------
$ 9,780,881
- --------------------------------------------------------------------------------
Escrowed / Prerefunded -- 0.4%
- --------------------------------------------------------------------------------
NR BBB+ $ 1,000 Lucas County (Flowers Hospital),
6.125%, 12/1/13 $ 1,104,990
- --------------------------------------------------------------------------------
$ 1,104,990
- --------------------------------------------------------------------------------
General Obligations -- 6.6%
- --------------------------------------------------------------------------------
NR NR $ 3,035 Belmont County,
7.30%, 12/1/12 $ 3,273,278
A1 NR 725 City of Medina, OH Fire Station
Improvement, 3.00%, 12/1/10 567,153
NR NR 2,450 Cleveland City School District,
7.25%, 6/15/98 2,477,318
NR NR 800 Mahoning Valley, OH, Sanitation
District, 7.80%, 12/15/08 872,056
NR NR 950 Mahoning Valley, OH, Sanitation
District, 7.80%, 12/15/09 1,035,567
Aa1 AA+ 1,500 Ohio State Infrastructure
Improvement, 0.00%, 8/1/11 737,760
NR NR 1,000 Tuscarawas Public Library
Improvement, 6.90%, 12/1/11 1,047,820
NR NR 6,855 Youngstown, OH,
7.35%, 7/1/05 7,845,958
- --------------------------------------------------------------------------------
$ 17,856,910
- --------------------------------------------------------------------------------
Hospitals -- 23.7%
- --------------------------------------------------------------------------------
NR AAA $ 1,000 Allen County OH LIMA
Convalescent Home Foundation
(GNMA), 6.40%, 1/1/21 $ 1,059,380
Baa3 BBB- 1,000 Butler County (Hamilton-Hughe
Hospital), 7.50%, 1/1/10 1,087,500
A A 1,015 City of Garfield Heights
(Marymount Hospital),
6.65%, 11/15/11 1,095,997
A A 1,000 City of Garfield Heights
(Marymount Hospital),
6.70%, 11/15/15 1,081,080
A1 A 2,100 Cuyahoga County, Fairview General
Hospital, 6.25%, 8/15/10 2,233,497
A1 A 2,000 Cuyahoga County, Meridia Health
System, 6.50%, 8/15/12 2,092,800
A1 A 2,370 Cuyahoga County, Meridia Health
System, 7.00%, 8/15/23 2,556,638
Aa AA 4,450 Cuyahoga County, University
Hospitals Health System,
6.00%, 1/15/22 4,636,144
Aa AA 750 Cuyahoga County, University
Hospitals Health System,
6.50%, 1/15/19 801,728
NR BBB+ 3,705 Defiance Hospital, Inc.,
7.625%, 11/1/03 3,787,770
Baa3 BBB- 765 East Liverpool City Hospital-Series
A, 8.00%, 10/1/21 840,444
Baa3 BBB- 1,000 East Liverpool City Hospital-Series
B, 8.00%, 10/1/21 1,098,620
A A 4,000 Erie County, (Fireland Community
Hospital Project), 6.75%, 1/1/08 4,347,320
Aa NR 2,000 Franklin County (Children's
Hospital), 5.75%, 11/1/20 2,049,100
</TABLE>
See notes to financial statements
53
<PAGE>
Ohio Municipals Portfolio as of September 30, 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)
- ------------------------------------------------------------------------
Aa NR $ 3,000 Franklin County
(Children's Hospital),
6.60%, 5/1/13 $ 3,271,050
A1 A 5,115 Hamilton County (Bethesda
Hospital, Inc.), 6.25%,
1/1/12 5,432,386
Aa2 NR 1,000 Hamilton County, OH Wesley
Hall, 6.50%, 3/1/15 1,083,060
A1 NR 5,900 Lorain County (Humility of
Mary Health Care Corp.),
5.90%, 12/15/08 6,433,714
A1 NR 1,095 Lorain County (Humility of
Mary Health Care Corp.),
7.125%, 12/15/06 1,225,535
A1 NR 1,000 Lorain County (Humility of
Mary Health Care Corp.),
7.20%, 12/15/11 1,132,250
A1 NR 1,750 Lorain, OH, Hospital
Improvement, (Lakeland
County Hospital), 6.50%,
11/15/12 1,963,938
Baa2 BBB 3,800 Miami, Upper Valley
Medical Center, 6.375%,
5/15/26 3,962,602
NR NR 9,670 Mt. Vernon Ohio Hospital,
(Knox Community Hospital),
7.875%, 6/1/12 9,933,410
Aa2 NR 600 Warren County, OH,
Hospital Facilities,
(Otterbein Homes
Project), 7.20%, 7/1/11 655,428
- ------------------------------------------------------------------------
$ 63,861,391
- ------------------------------------------------------------------------
Housing -- 14.2%
- ------------------------------------------------------------------------
Aa NR $ 1,300 City of Clermont, Laurels
(FHA), 6.00%, 9/1/20 $ 1,334,463
NR NR 3,000 Cuyahoga County, OH,
(Rolling Hills Apts.),
8.00%, 1/1/28 2,972,400
Aa NR 2,500 Franklin County MFMR -
Tuttle Park (FHA), (AMT),
6.50%, 3/1/26 2,669,275
Aa NR 5,985 Franklin County MFMR -
Tuttle Park (FHA), (AMT),
6.60%, 3/1/36 6,411,790
Aa NR 3,645 Franklin County, (Hamilton
Creek Apartments) (FHA),
(AMT), 5.55%, 7/1/24 3,550,522
Aa NR 1,000 Franklin County, (Hamilton
Creek Apartments) (FHA),
(AMT), 5.80%, 7/1/14 1,012,230
Aaa NR 2,500 Kent, OH, (MFMR) (Silver
Meadows) (GNMA), (AMT),
7.30%, 12/20/36 2,785,225
NR NR 2,990 Lucas County, OH, (County
Creek Project), (AMT),
8.00%, 7/1/26 2,926,941
Aaa AAA 935 Ohio HFA SFMR, (GNMA)
(AMT) Variable Rate,
3/1/31/(1)/ 1,046,031
NR AAA 3,310 Ohio HFA, (GNMA), (AMT),
6.375%, 3/1/25 3,511,844
NR AAA 4,595 Ohio HFA, (GNMA), (AMT),
6.70%, 3/1/25 4,915,869
Aa A 1,000 Ohio HFA, Aristocrat
South Board & Care (FHA),
(AMT), 7.30%, 8/1/31 1,057,000
NR AAA 1,250 Ohio HFA, MFMR-Asbury
Woods (FHA), 7.00%,
10/1/24 1,302,000
Baa BBB 2,925 Puerto Rico Commonwealth
Urban Renewal and Housing
Corp., 0.00%, 10/1/99 2,686,086
- ------------------------------------------------------------------------
$ 38,181,676
- ------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 12.1%
- ------------------------------------------------------------------------
Aa NR $ 2,000 Cuyahoga OH IDR -
Chippewa Place, 6.60%,
8/1/15 $ 2,102,380
Baa1 NR 3,750 Ohio Air Quality
Development Authority,
(Ashland Oil Inc.),
6.85%, 4/1/10 3,964,913
NR A- 555 Ohio Economic Development
Commission, (Burrows Paper
Corp.) (AMT), 7.625%, 6/1/11 609,939
NR A- 255 Ohio Economic Development
Commission, (Cheryl & Co.)
(AMT), 5.50%, 12/1/04 269,423
NR A- 530 Ohio Economic Development
Commission, (Cheryl & Co.),
(AMT), 5.90%, 12/1/09 565,621
NR A- 1,655 Ohio Economic Development
Commission, (Consolidated
Biscuit), (AMT), 7.00%,
12/1/09 1,819,606
NR A- 3,255 Ohio Economic Development
Commission, (J J & W LP)
(AMT), 6.70%, 12/1/14 3,546,225
NR BB- 1,020 Ohio Economic Development
Commission, (Kmart Corp.),
6.75%, 5/15/07 1,076,243
NR A- 750 Ohio Economic Development
Commission, (Luigino's Inc.)
(AMT), 6.85%, 6/1/01 759,278
</TABLE>
See notes to financial statements
54
<PAGE>
Ohio Municipals Portfolio as of September 30, 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)
- ---------------------------------------------------------------------------------------
NR A- $ 720 Ohio Economic Development
Commission, (Ohio Enterprise Bond
Fund-Progress Plastics Products),
(AMT), 6.80%, 12/1/01 $ 767,333
NR A- 1,525 Ohio Economic Development
Commission, (Progress
Plastic Products) (AMT),
7.80%, 12/1/09 1,740,269
NR A- 1,000 Ohio Economic Development
Commission, (Royal Appliance
Manufacturing Co.) (AMT),
7.625%, 12/1/11 1,101,140
NR A- 680 Ohio Economic Development
Commission, (Royal Appliance
Manufacturing Co.) (AMT),
7.625%, 12/1/11 748,775
NR A- 880 Ohio Economic Development
Commission, (VSM Corp.) (AMT),
7.375%, 12/1/11 960,881
Aa3 AA 1,000 Ohio Pollution Control, (Standard
Oil Co.), 6.75%, 12/1/15 1,184,360
Baa2 BBB 3,885 Ohio Water Development
Authority, (Union Carbide
Corp.), 5.50%, 1/15/07 3,886,865
Baa3 BBB- 4,000 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 4,281,040
NR NR 3,000 State of Ohio, Solid Waste,
(Republic Engineered Steels Inc.),
(AMT), 9.00%, 6/1/21 3,119,250
- ---------------------------------------------------------------------------------------
$ 32,503,541
- ---------------------------------------------------------------------------------------
Insured-Colleges and Universities -- 0.4%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 1,000 Ohio Higher Education Facilities
(University of Dayton) (FGIC),
5.80%, 12/1/14 $ 1,051,880
- ---------------------------------------------------------------------------------------
$ 1,051,880
- ---------------------------------------------------------------------------------------
Insured-Electric Utilities -- 8.4%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 1,650 Cleveland Public Power System,
(MBIA), 7.00%, 11/15/17 $ 1,838,348
Aaa AAA 15,675 Cleveland, OH, Public
Power System (MBIA),
5.00%, 11/15/20 14,991,099
Aaa AAA 2,000 Cuyahoga County Medical Center
Utility System (MBIA) (AMT),
6.10%, 8/15/15 2,116,120
Aaa AAA 750 Guam Power Authority
Revenue, Series A (AMBAC),
5.25%, 10/1/13 761,745
Aaa AAA 2,300 Puerto Rico Electric Power
Authority, (FSA) Variable
Rate, 7/1/02/(1)/ 2,547,250
Aaa AAA 815 Puerto Rico, Electric Power
Authority, (MBIA), 0.00%,
7/1/17 299,317
- ---------------------------------------------------------------------------------------
$ 22,553,879
- ---------------------------------------------------------------------------------------
Insured-General Obligations -- 2.8%
- ---------------------------------------------------------------------------------------
NR AAA $ 1,700 Commonwealth of Puerto Rico
"RIBS" (AMBAC), Variable
Rate, 7/1/15/(1)/ $ 1,853,000
Aaa AAA 500 Hilliard Ohio School District
(FGIC), 5.00%, 12/1/20 480,730
Aaa AAA 2,000 North Olmsted, OH (AMBAC),
5.00%, 12/1/16 1,956,440
Aaa AAA 3,000 Puerto Rico (FSA), Variable
Rate, 7/1/22/(1)/ 3,296,250
- ---------------------------------------------------------------------------------------
$ 7,586,420
- ---------------------------------------------------------------------------------------
Insured-Hospitals -- 7.4%
- ---------------------------------------------------------------------------------------
Aaa AAA $ 2,500 Akron, Bath and Copley Townships
Children's Hospital Medical
Center of Akron, (AMBAC),
5.25%, 11/15/20 $ 2,428,150
Aaa AAA 1,000 Clermont County, Mercy Health
System (AMBAC) Variable
Rate, 10/5/21/(1)/ 1,215,000
Aaa AAA 2,750 Mansfield General Hospital
(AMBAC), 6.70%, 12/1/09 3,021,040
Aaa AAA 5,000 Middleburg Heights Hospital-
Southwestern General (FSA),
5.75%, 8/15/21 5,169,900
Aaa AAA 1,000 Montgomery County, (Miami
Valley Hospital) (AMBAC),
6.25%, 11/15/16 1,066,200
Aaa AAA 6,565 Portage County, (Robinson
Memorial Hospital),
(MBIA), 5.80%, 11/15/15 6,890,558
- ---------------------------------------------------------------------------------------
$ 19,790,848
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
55
<PAGE>
Ohio Municipals Portfolio as of September 30, 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 -- 1.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 750 Ohio Capital Corp. FHA
Insured Mortgage Loans,
(MBIA), 6.50%, 1/1/25 $ 772,575
Aaa AAA 970 Ohio Capital Corp. FHA
Insured Mortgage Loans,
(MBIA), 7.25%, 7/1/24 1,008,431
Aaa AAA 1,100 Ohio Capital Corp. MFMR -
Horizon Apts. (MBIA),
6.50%, 1/1/23 1,147,377
- --------------------------------------------------------------------------------
$ 2,928,383
- --------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 1.1%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Ohio Higher Education
(University of Dayton),
(FGIC), 0.00%, 12/1/06 $ 654,890
Aaa AAA 2,500 University of
Cincinnati-Ohio (MBIA),
5.125%, 6/1/24 2,410,075
- --------------------------------------------------------------------------------
$ 3,064,965
- --------------------------------------------------------------------------------
Insured-Life Care -- 1.0%
- --------------------------------------------------------------------------------
Aaa AAA $ 1,000 Lorain County, OH,
(Catholic Healthcare
Partners), (MBIA),
5.625%, 9/1/14 $ 1,037,360
Aaa AAA 1,500 Lorain County, OH,
(Catholic Healthcare
Partners), (MBIA),
5.625%, 9/1/15 1,550,640
- --------------------------------------------------------------------------------
$ 2,588,000
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 0.4%
- --------------------------------------------------------------------------------
Aaa AAA $ 2,110 Hudson Local School
District, (FGIC), 0.00%,
12/15/09 $ 1,157,377
- --------------------------------------------------------------------------------
$ 1,157,377
- --------------------------------------------------------------------------------
Lease Revenue / Certificates of Participation -- 0.4%
- --------------------------------------------------------------------------------
A2 A+ $ 1,000 University of Cincinnati,
6.50%, 12/1/11 $ 1,060,750
- --------------------------------------------------------------------------------
$ 1,060,750
- --------------------------------------------------------------------------------
Life Care -- 1.9%
- --------------------------------------------------------------------------------
Aa NR $ 1,995 Franklin County,
Kensington Place, 6.75%,
1/1/34 $ 2,094,850
Aa2 NR 1,000 Hamilton County, OH
Hospital - Episcopal
Retirement Home, 6.80%,
1/1/08 1,077,390
NR BBB- 1,800 Marion OH Health Care -
United Church Home,
6.30%, 11/15/15 1,875,240
- --------------------------------------------------------------------------------
$ 5,047,480
- --------------------------------------------------------------------------------
Nursing Homes -- 5.6%
- --------------------------------------------------------------------------------
Aaa NR $ 1,305 Cuyahoga County, OH,
(Maple Care Center)
(GNMA), (AMT), 8.00%,
8/20/16 $ 1,553,459
NR NR 3,020 Greene County, OH, IDA,
(Fairview Extended Care),
10.125%, 1/1/11 3,630,795
NR AAA 1,205 North Canton, OH, Health
Care Facilities, 6.10%,
9/20/16 1,278,601
NR AAA 6,455 North Canton, OH, Health
Care Facilities, 9.55%,
3/20/32 8,675,519
- --------------------------------------------------------------------------------
$ 15,138,374
- --------------------------------------------------------------------------------
Special Tax Revenue -- 1.2%
- --------------------------------------------------------------------------------
Baa1 A $ 3,000 Puerto Rico, Highway and
Transportation Authority,
6.625%, 7/1/12 $ 3,284,610
- --------------------------------------------------------------------------------
$ 3,284,610
- --------------------------------------------------------------------------------
Transportation -- 2.3%
- --------------------------------------------------------------------------------
NR BBB $ 5,630 Guam Airport Authority
(AMT), 6.70%, 10/1/23 $ 6,103,933
- --------------------------------------------------------------------------------
$ 6,103,933
- --------------------------------------------------------------------------------
Water and Sewer -- 0.4%
- --------------------------------------------------------------------------------
NR NR $ 1,000 Vermilion, OH, 7.25%,
8/15/15 $ 1,061,670
- --------------------------------------------------------------------------------
$ 1,061,670
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
56
<PAGE>
Ohio Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------
<S> <C>
Total Tax-Exempt Investments -- 100.0%
(identified cost $252,173,553) $269,107,520
- --------------------------------------------------------------------------------
</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 Ohio
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at September 30, 1997, 22.2% 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 insured by
financial institution ranged from 1% to 13% of total investments.
/(1)/ Security has been issued as an inverse floater bond.
See notes to financial statements
57
<PAGE>
Rhode Island Municipals Portfolio as of September 30, 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 -- 1.9%
- ----------------------------------------------------------------------------------------
A NR $ 750 Rhode Island Student Loan
Authority, (AMT), 5.60%, 12/1/12 $ 761,445
- ----------------------------------------------------------------------------------------
$ 761,445
- ----------------------------------------------------------------------------------------
General Obligations -- 5.0%
- ----------------------------------------------------------------------------------------
Baa1 A $ 1,250 Commonwealth of Puerto Rico
Aqueduct and Sewer Authority,
5.00%, 7/1/19 $ 1,181,775
NR BBB 750 Guam, 5.40%, 11/15/18 736,058
Baa NR 105 West Warwick, 6.80%, 7/15/98 106,799
- ----------------------------------------------------------------------------------------
$ 2,024,632
- ----------------------------------------------------------------------------------------
Hospitals -- 11.5%
- ----------------------------------------------------------------------------------------
A3 A- $ 1,250 Rhode Island Health and
Educational Building Corp. (South
County Hospital), 5.75%, 11/15/26 $ 1,272,863
NR A 1,015 Rhode Island Health and
Educational Building Corp.,
(Butler Hospital), 5.125%, 1/1/08 1,009,722
NR AA 1,500 Rhode Island Health and
Educational Building Corp.,
(Landmark Medical Center),
5.875%, 10/1/19 1,518,600
Baa3 BBB 830 Rhode Island Health and
Educational Building Corp.,
(Westerly Hospital), 6.00%, 7/1/14 840,159
- ----------------------------------------------------------------------------------------
$ 4,641,344
- ----------------------------------------------------------------------------------------
Housing -- 17.2%
- ----------------------------------------------------------------------------------------
Aa2 AA+ $ 220 Rhode Island Housing and Mortgage
Finance Corp., 6.50%, 4/1/27 $ 230,952
Aa2 AA+ 270 Rhode Island Housing and Mortgage
Finance Corp., 6.70%, 10/1/14 290,231
Aa2 AA+ 90 Rhode Island Housing and Mortgage
Finance Corp., 6.85%, 4/1/27 96,392
Aa AA+ 200 Rhode Island Housing and Mortgage
Finance Corp., 7.875%, 10/1/22 210,582
Aa2 AA+ 1,750 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
6.60%, 10/1/25 1,847,248
Aa2 AA+ 100 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
6.70%, 10/1/12 106,348
Aa2 AA+ 875 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
6.80%, 10/1/25 /(1)/ 924,989
Aa2 AA+ 1,000 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
7.10%, 10/1/23 1,047,600
Aa2 AA+ 2,000 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
7.55%, 10/1/22 2,129,420
Aa AA+ 35 Rhode Island Housing and Mortgage
Finance Corp., (AMT),
7.875%, 10/1/22 36,852
- ----------------------------------------------------------------------------------------
$ 6,920,614
- ----------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution
Control Revenue -- 1.3%
- ----------------------------------------------------------------------------------------
Baa3 BBB- $ 500 Puerto Rico Port Authority
(American Airlines), (AMT),
6.30%, 6/1/23 $ 528,710
- ----------------------------------------------------------------------------------------
$ 528,710
- ----------------------------------------------------------------------------------------
Insured-General Obligations -- 12.9%
- ----------------------------------------------------------------------------------------
NR AAA $ 250 Commonwealth of Puerto Rico
"RIBS" (AMBAC), Variable Rate,
7/1/15 /(2)/ $ 272,500
Aaa AAA 1,000 Cranston, (MBIA), 6.10%, 6/15/15 1,067,560
Aaa AAA 1,500 Kent County Water Authority,
(MBIA), 6.35%, 7/15/14 1,648,575
Aaa AAA 1,000 Rhode Island Depositors Economic
Protection Corp., (MBIA),
5.80%, 8/1/09 1,094,160
Aaa AAA 1,000 Rhode Island Depositors Economic
Protection Corp., (MBIA),
5.80%, 8/1/12 1,089,060
- ----------------------------------------------------------------------------------------
$ 5,171,855
- ----------------------------------------------------------------------------------------
Insured-Hospitals -- 14.9%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 2,700 Rhode Island Health and
Educational Building, Lifespan
Obligation Group, (MBIA),
5.25%, 5/15/26 $ 2,599,289
</TABLE>
See notes to financial statements
58
<PAGE>
Rhode Island Municipals Portfolio as of September 30, 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 $ 3,350 Rhode Island State Health And
Educational Corp., (Lifespan)
(MBIA), 5.75%, 5/15/23 $ 3,415,224
- ----------------------------------------------------------------------------------------
$ 6,014,513
- ----------------------------------------------------------------------------------------
Insured-Housing -- 7.6%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 805 Providence Housing Development
Corp. Mortgage, (Barbara Jordan
Apartments), (MBIA), 6.50%, 7/1/09 $ 858,516
Aa2 AA+ 500 Rhode Island Housing and Mortgage
Finance Corp., (MBIA), 6.20%,
10/1/06 527,300
Aaa AAA 1,075 Villa Excelsior Housing
Development Corp. Mortgage,
(MBIA), 6.75%, 1/1/19 1,153,346
Aaa AAA 500 Villa Excelsior Housing
Development Corp. Mortgage,
(MBIA), 6.85%, 1/1/24 537,765
- ----------------------------------------------------------------------------------------
$ 3,076,927
- ----------------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 12.8%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 3,000 Convention Center Authority of
Rhode Island, (MBIA), 5.00%,
5/15/20 $ 2,825,489
Aaa AAA 2,300 Convention Center Authority of
Rhode Island, (MBIA), 5.25%,
5/15/15 2,332,959
- ----------------------------------------------------------------------------------------
$ 5,158,448
- ----------------------------------------------------------------------------------------
Insured-Water and Sewer -- 4.3%
- ----------------------------------------------------------------------------------------
Aaa AAA $ 750 Rhode Island Clean Water, Safe
Drinking Water, (AMBAC), 6.70%,
1/1/15 $ 847,470
Aaa AAA 350 Rhode Island Clean Water, Water
Pollution Control, (MBIA), 5.40%,
10/1/15 361,228
Aaa AAA 500 Rhode Island Clean Water, Water
Pollution Control, (MBIA), 5.85%,
10/1/09 535,900
- ----------------------------------------------------------------------------------------
$ 1,744,598
- ----------------------------------------------------------------------------------------
Life Care -- 2.6%
- ----------------------------------------------------------------------------------------
NR NR $ 1,000 Rhode Island Health and
Educational Building, (Tockwotton
Home), 6.25%, 8/15/22 $ 1,033,390
- ----------------------------------------------------------------------------------------
$ 1,033,390
- ----------------------------------------------------------------------------------------
Miscellaneous -- 0.6%
- ----------------------------------------------------------------------------------------
Baa1 A- $ 230 Rhode Island Depositors Economic
Protection Corp., 5.75%, 8/1/21 $ 243,285
- ----------------------------------------------------------------------------------------
$ 243,285
- ----------------------------------------------------------------------------------------
Nursing Homes -- 1.8%
- ----------------------------------------------------------------------------------------
NR NR $ 725 Rhode Island State Health And
Educational Building Corp.,
(Steere House), 5.80%, 7/1/20 $ 714,125
- ----------------------------------------------------------------------------------------
$ 714,125
- ----------------------------------------------------------------------------------------
Special Tax Revenue -- 4.2%
- ----------------------------------------------------------------------------------------
Baa3 BBB- $ 1,500 City of Providence Special
Obligation Tax Increment Bonds,
7.65%, 6/1/16 $ 1,673,175
- ----------------------------------------------------------------------------------------
$ 1,673,175
- ----------------------------------------------------------------------------------------
Transportation -- 1.4%
- ----------------------------------------------------------------------------------------
NR BBB $ 500 Guam Airport Authority, (AMT),
6.70%, 10/1/23 $ 542,090
- ----------------------------------------------------------------------------------------
$ 542,090
- ----------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $38,164,900) $ 40,249,151
- ----------------------------------------------------------------------------------------
</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
59
<PAGE>
Rhode Island Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS CONT'D
The Portfolio invests primarily in debt securities issued by Rhode Island
municipalities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at September 30, 1997, 49.9% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 2.8% to 47.1% 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
60
<PAGE>
West Virginia Municipals Portfolio as of September 30, 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 -- 14.5%
- --------------------------------------------------------------------------------------
NR BBB $ 750 Guam Power Authority,
5.25%, 10/1/13 $ 731,775
NR BBB 500 Guam Power Authority,
5.25%, 10/1/23 477,500
A2 A 2,000 Harrison, WV PCR (Monongahela
Power Co. Harrison Station),
(AMT), 6.75%, 8/1/24 2,207,219
Baa1 BBB+ 1,000 Mason, WV PCR (Appalacian Power
Co.), 6.85%, 6/1/22 1,094,970
Baa1 BBB+ 855 Puerto Rico Electric Power
Authority, 0.00%, 7/1/17 302,490
- --------------------------------------------------------------------------------------
$ 4,813,954
- --------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 2.7%
- --------------------------------------------------------------------------------------
Aaa AAA $ 2,500 Kanawha-Putnam, WV Single Family
Mortgage (AMBAC),
0.00%, 12/1/16 $ 896,025
- --------------------------------------------------------------------------------------
$ 896,025
- --------------------------------------------------------------------------------------
General Obligations -- 1.2%
- --------------------------------------------------------------------------------------
NR BBB $ 400 Government of Guam,
5.375%, 11/15/13 $ 394,252
- --------------------------------------------------------------------------------------
$ 394,252
- --------------------------------------------------------------------------------------
Hospitals -- 9.5%
- --------------------------------------------------------------------------------------
NR BBB+ $ 1,250 Berkeley, WV Building Commission
(City Hospital), 6.50%, 11/1/22 $ 1,306,075
Baa1 BBB+ 250 Princeton, WV (Community
Hospital), 6.00%, 5/1/18 253,478
A1 NR 500 West Virginia HFA (Charleston Area
Medical Center), 6.50%, 9/1/16 530,135
A1 NR 1,000 West Virginia HFA (Charleston Area
Medical Center), 6.50%, 9/1/23 1,055,980
- --------------------------------------------------------------------------------------
$ 3,145,668
- --------------------------------------------------------------------------------------
Housing -- 1.5%
- --------------------------------------------------------------------------------------
Aaa AAA $ 500 West Virginia State Housing
Development Fund, (AMT),
5.70%, 11/1/17 $ 507,395
- --------------------------------------------------------------------------------------
$ 507,395
- --------------------------------------------------------------------------------------
Industrial Development Revenue / Pollution Control Revenue -- 10.3%
- --------------------------------------------------------------------------------------
NR A- $ 1,375 Jefferson, WV (Royal Venders,
Inc.) (AMT), 5.90%, 8/1/04 $ 1,457,885
Baa2 NR 300 Kanawha, WV (Union Carbide
Chemicals and Plastics Co.)
(AMT), 8.00%, 8/1/20 326,691
Baa3 BBB- 500 Puerto Rico Port Authority
(American Airlines) (AMT),
6.25%, 6/1/26 535,130
NR NR 1,000 Upshur, WV Solid Waste (TJI)
(AMT), 7.00%, 7/15/25 1,092,340
- --------------------------------------------------------------------------------------
$ 3,412,046
- --------------------------------------------------------------------------------------
Insured-Education -- 4.9%
- --------------------------------------------------------------------------------------
Aaa AAA $ 1,000 West Virginia State University
(Marshall Library) (AMBAC),
5.75%, 4/1/16 $ 1,042,350
Aaa AAA 550 West Virginia State University
System (AMBAC), 6.00%, 4/1/12 587,851
- --------------------------------------------------------------------------------------
$ 1,630,201
- --------------------------------------------------------------------------------------
Insured-Electric Utilities -- 3.0%
- --------------------------------------------------------------------------------------
Aaa AAA $ 250 Commonwealth of Puerto Rico
Electric Power Authority STRIPES
(FSA), Variable Rate, 7/1/03/(1)/ $ 283,125
Aaa AAA 700 Marshall, WV PCR (Ohio Power
Kammer Plant) (MBIA),
5.45%, 7/1/14 712,222
- --------------------------------------------------------------------------------------
$ 995,347
- --------------------------------------------------------------------------------------
Insured-General Obligations -- 3.6%
- --------------------------------------------------------------------------------------
Aaa AAA $ 150 West Virginia (FGIC),
5.25%, 11/1/26 $ 146,282
Aaa AAA 1,000 West Virginia (FGIC),
5.75%, 11/1/21 1,031,380
- --------------------------------------------------------------------------------------
$ 1,177,662
- --------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
61
<PAGE>
West Virginia Municipals Portfolio as of September 30, 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 -- 12.1%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,300 West Virginia HFA (Cabell
Huntington Hospital) (AMBAC),
6.25%, 1/1/19 $ 1,391,429
Aaa AAA 850 West Virginia HFA (Charleston
Area Medical Center) (MBIA),
5.75%, 9/1/13 893,903
Aaa AAA 1,200 West Virginia HFA (Linked Bulls &
Bears) (MBIA), 6.10%, 1/1/18 1,246,536
Aaa AAA 500 West Virginia HFA (University
Hospital) (MBIA), 5.00%, 6/1/16 478,320
- -----------------------------------------------------------------------------------------
$ 4,010,188
- -----------------------------------------------------------------------------------------
Insured-Lease Revenue / Certificates of
Participation -- 1.6%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 500 West Virginia School Building
Authority, (AMBAC), 5.60%, 7/1/17 $ 513,040
- -----------------------------------------------------------------------------------------
$ 513,040
- -----------------------------------------------------------------------------------------
Insured-Transportation -- 2.2%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 1,000 West Virginia Parkways Economic
Development and Tourism Authority
(FGIC), 0.00%, 5/15/04 $ 737,470
- -----------------------------------------------------------------------------------------
$ 737,470
- -----------------------------------------------------------------------------------------
Insured-Water and Sewer -- 22.9%
- -----------------------------------------------------------------------------------------
Aaa AAA $ 250 Berkeley, WV Public Service
District Sewer (MBIA), 5.75%,
10/1/25 $ 258,445
Aaa AAA 500 Crab Orchard, WV Public Service
District, (AMBAC), 5.50%, 10/1/25 502,045
Aaa AAA 750 Greenbrier, WV Public Service
District Sewer (MBIA), 5.625%,
10/1/19 764,483
Aaa AAA 1,500 Parkersburg, WV Waterworks and
Sewer (FSA), 5.80%, 9/1/19 1,557,720
Aaa AAA 2,000 West Virginia Water Development
(Loan Program II) (FSA),
5.25%, 11/1/35 1,920,500
Aaa AAA 750 West Virginia Water Development
(Loan Program II) (FSA),
6.00%, 11/1/14 806,460
Aaa AAA 500 West Virginia Water Development
Authority (FSA), 5.00%, 11/1/21 479,045
Aaa AAA 1,280 Williamson, WV Waterworks and
Sewage System (AMBAC),
5.50%, 10/1/25 1,285,235
- -----------------------------------------------------------------------------------------
$ 7,573,933
- -----------------------------------------------------------------------------------------
Nursing Homes -- 2.3%
- -----------------------------------------------------------------------------------------
NR NR $ 745 Kanawha, WV (Beverly Enterprises),
7.25%, 11/1/04 $ 774,666
- -----------------------------------------------------------------------------------------
$ 774,666
- -----------------------------------------------------------------------------------------
Solid Waste -- 6.1%
- -----------------------------------------------------------------------------------------
A2 A $ 2,000 Braxton County, WV, (Weyerhaeuser
Co.), (AMT), 5.80%, 6/1/27/(2)/ $ 2,024,520
- -----------------------------------------------------------------------------------------
$ 2,024,520
- -----------------------------------------------------------------------------------------
Special Tax Revenue -- 1.6%
- -----------------------------------------------------------------------------------------
Baa1 A $ 500 Puerto Rico Highway and
Transportation Authority,
5.50%, 7/1/15 $ 514,570
- -----------------------------------------------------------------------------------------
$ 514,570
- -----------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $31,140,565) $ 33,120,937
- -----------------------------------------------------------------------------------------
</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 West 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 September 30, 1997, 48.7% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions and
financial guaranty assurance agencies. The aggregate percentage insured by
financial institution ranged from 0.5% to 5.4% 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
62
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS
Statements of Assets and Liabilities
As of September 30, 1997
<TABLE>
<CAPTION>
California Florida Massachusetts Mississippi
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investments --
Identified cost $288,296,835 $462,068,417 $238,584,146 $19,751,773
Unrealized appreciation 37,235,739 31,954,789 23,291,554 2,027,684
- ------------------------------------------------------------------------------------------------------------------------------------
Investment at value (Note 1A) $325,532,574 $494,023,206 $261,875,700 $21,779,457
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 387 $ 10,123,387 $ 1,204,933 $ 236
Receivable for investments sold -- 95,053 -- 10,270
Interest receivable 4,798,482 9,964,572 4,168,799 398,914
Receivable for daily variation margin on open financial futures
contracts (Notes 1E and 6) 43,656 -- 26,125 3,094
Deferred organization expenses (Note 1D) 3,299 3,413 2,001 456
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $330,378,398 $514,209,631 $267,277,558 $22,192,427
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ 1,820,052 $ -- $ 13,594,370 $ --
Demand note payable (Note 5) 1,529,000 -- -- 64,000
Payable to affiliate for Trustees' fees (Note 2) 4,365 5,363 3,867 42
Accrued expenses 20,966 2,853 4,560 1,638
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 3,374,383 $ 8,216 $ 13,602,797 $ 65,680
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $327,004,015 $514,201,415 $253,674,761 $22,126,747
- ------------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $290,157,928 $482,246,626 $230,616,384 $20,126,676
Net unrealized appreciation of investments and financial futures
contracts (computed on the basis of identified cost) 36,846,087 31,954,789 23,058,377 2,000,071
- ------------------------------------------------------------------------------------------------------------------------------------
Total $327,004,015 $514,201,415 $253,674,761 $22,126,747
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
63
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Assets and Liabilities
As of September 30, 1997
<TABLE>
<CAPTION>
New York Ohio Rhode Island West Virginia
Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Investments --
Identified cost $481,258,800 $252,173,553 $38,164,900 $31,140,565
Unrealized appreciation 43,589,617 16,933,967 2,084,251 1,980,372
- ----------------------------------------------------------------------------------------------------------------------------------
Investments, at value (Note 1A) $524,848,417 $269,107,520 $40,249,151 $33,120,937
- ----------------------------------------------------------------------------------------------------------------------------------
Cash $ 488 $ 1,062 $ 861 $ 618
Receivable for investments sold 95,000 -- 5,000 970,596
Interest receivable 8,528,279 4,355,826 808,142 537,171
Receivable for daily variation margin on open financial
futures contracts (Notes 1E and 6) 110,000 -- 9,969 5,156
Deferred organization expenses (Note 1D) 2,330 1,385 472 473
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $533,584,514 $273,465,793 $41,073,595 $34,634,951
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased $ -- $ -- $ 106,000 $ --
Demand note payable (Note 5) 5,940,000 2,157,000 749,000 1,127,000
Payable to affiliate for Trustees' fees (Note 2) 5,363 3,867 416 416
Accrued expenses 35,637 36,341 530 4,540
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 5,981,000 $ 2,197,208 $ 855,946 $ 1,131,956
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $527,603,514 $271,268,585 $40,217,649 $33,502,995
- ----------------------------------------------------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $484,995,697 $254,334,618 $38,222,373 $31,556,928
Net unrealized appreciation of investments and
financial futures contracts (computed on the basis of
identified cost) 42,607,817 16,933,967 1,995,276 1,946,067
- ----------------------------------------------------------------------------------------------------------------------------------
Total $527,603,514 $271,268,585 $40,217,649 $33,502,995
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
64
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
California Florida Massachusetts Mississippi
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1 B)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income $ 21,773,352 $ 34,018,008 $ 16,713,453 $ 1,424,256
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 21,773,352 $ 34,018,008 $ 16,713,453 $ 1,424,256
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 1,687,887 $ 2,593,352 $ 1,203,548 $ 44,507
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 17,418 21,370 15,444 521
Custodian fee (Note 1J) 164,950 202,095 135,200 17,504
Legal and accounting services 34,723 35,555 30,911 18,903
Bond pricing -- -- -- 4,975
Amortization of organization expenses (Note 1D) 5,624 8,829 5,208 621
Miscellaneous 50,049 52,923 42,327 4,397
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 1,960,651 $ 2,914,124 $ 1,432,638 $ 91,428
- ------------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1J) $ 47,105 $ 202,095 $ 38,619 $ 3,402
- ------------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ 47,105 $ 202,095 $ 38,619 $ 3,402
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 1,913,546 $ 2,712,029 $ 1,394,019 $ 88,026
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 19,859,806 $ 31,305,979 $ 15,319,434 $ 1,336,230
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost
basis) $ 8,284,752 $ 16,626,056 $ 5,018,545 $ 387,066
Financial futures contracts (2,978,632) (8,832,503) (2,898,402) (203,661)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments $ 5,306,120 $ 7,793,553 $ 2,120,143 $ 183,405
- ------------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 11,238,457 $ (2,727,363) $ 6,730,261 $ 717,894
Financial futures contracts 21,385 1,417,470 75,551 1,160
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $ 11,259,842 $ (1,309,893) $ 6,805,812 $ 719,054
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments $ 16,565,962 $ 6,483,660 $ 8,925,955 $ 902,459
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 36,425,768 $ 37,789,639 $ 24,245,389 $ 2,238,689
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
65
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
New York Ohio Rhode Island West Virginia
Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (Note 1B)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income $ 34,720,613 $ 17,570,035 $ 2,319,707 $ 2,157,462
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 34,720,613 $ 17,570,035 $ 2,319,707 $ 2,157,462
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 2,603,611 $ 1,272,425 $ 96,316 $ 86,026
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 21,370 15,442 1,647 1,647
Custodian fee (Note 1J) 194,391 126,756 17,375 22,696
Legal and accounting services 38,819 30,152 19,679 18,589
Amortization of organization expenses (Note 1D) 6,278 3,960 635 631
Registration fees -- -- 300 --
Interest expense (Note 5) 318,274 104,537 8,764 8,471
Miscellaneous 20,343 25,863 10,559 4,884
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses $ 3,203,086 $ 1,579,135 $ 155,275 $ 142,944
- -----------------------------------------------------------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1J) $ -- $ 21,642 $ 16,782 $ 9,225
Reduction of investment adviser fee (Note 2) -- -- 47,940 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total expense reductions $ -- $ 21,642 $ 64,722 $ 9,225
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses $ 3,203,086 $ 1,557,493 $ 90,553 $ 133,719
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 31,517,527 $ 16,012,542 $ 2,229,154 $ 2,023,743
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 12,743,465 $ 5,784,752 $ 329,660 $ 455,903
Financial futures contracts (2,876,191) (1,882,739) (245,373) (487,515)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $ 9,867,274 $ 3,902,013 $ 84,287 $ (31,612)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 9,286,173 $ 4,176,029 $ 1,327,444 $ 1,270,693
Financial futures contracts (622,360) 484,361 (55,732) 51,559
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 8,663,813 $ 4,660,390 $ 1,271,712 $ 1,322,252
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 18,531,087 $ 8,562,403 $ 1,355,999 $ 1,290,640
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 50,048,614 $ 24,574,945 $ 3,585,153 $ 3,314,383
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
66
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
California Florida Massachusetts Mississippi
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 19,859,806 $ 31,305,979 $ 15,319,434 $ 1,336,230
Net realized gain on investments 5,306,120 7,793,553 2,120,143 183,405
Net change in unrealized appreciation
(depreciation) of investments 11,259,842 (1,309,893) 6,805,812 719,054
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 36,425,768 $ 37,789,639 $ 24,245,389 $ 2,238,689
- -----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 16,666,266 $ 35,743,906 $ 12,526,247 $ 1,197,391
Withdrawals (96,678,214) (183,706,131) (64,226,111) (6,588,894)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $ (80,011,948) $(147,962,225) $ (51,699,864) $ (5,391,503)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (43,586,180) $(110,172,586) $ (27,454,475) $ (3,152,814)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 370,590,195 $ 624,374,001 $ 281,129,236 $ 25,279,561
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 327,004,015 $ 514,201,415 $ 253,674,761 $ 22,126,747
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
67
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
New York Ohio Rhode Island West Virginia
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 31,517,527 $ 16,012,542 $ 2,229,154 $ 2,023,743
Net realized gain (loss) on investments 9,867,274 3,902,013 84,287 (31,612)
Net change in unrealized appreciation of
investments 8,663,813 4,660,390 1,271,712 1,322,252
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 50,048,614 $ 24,574,945 $ 3,585,153 $ 3,314,383
- -----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 25,819,897 $ 10,983,777 $ 4,387,108 $ 1,406,737
Withdrawals (152,794,517) (56,960,953) (9,921,791) (10,718,916)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions $(126,974,620) $ (45,977,176) $ (5,534,683) $ (9,312,179)
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (76,926,006) $ (21,402,231) $ (1,949,530) $ (5,997,796)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 604,529,520 $ 292,670,816 $ 42,167,179 $ 39,500,791
- -----------------------------------------------------------------------------------------------------------------------------------
At end of year $ 527,603,514 $ 271,268,585 $ 40,217,649 $ 33,502,995
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
68
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1996
<TABLE>
<CAPTION>
California Florida Massachusetts Mississippi
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 23,204,844 $ 38,410,360 $ 16,966,016 $ 1,582,970
Net realized gain on investments 4,542,939 5,705,251 3,096,278 306,294
Change in unrealized appreciation (depreciation)
of investments 1,456,651 (543,323) (1,167,330) 146,094
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 29,204,434 $ 43,572,288 $ 18,894,964 $ 2,035,358
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 20,317,562 $ 35,149,563 $ 16,336,133 $ 1,623,996
Withdrawals (89,601,939) (166,550,986) (56,272,108) (7,372,753)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $ (69,284,377) $(131,401,423) $ (39,935,975) $ (5,748,757)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (40,079,943) $ (87,829,135) $ (21,041,011) $ (3,713,399)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 410,670,138 $ 712,203,136 $ 302,170,247 $ 28,992,960
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 370,590,195 $ 624,374,001 $ 281,129,236 $ 25,279,561
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
69
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
For the Year Ended September 30, 1996
<TABLE>
<CAPTION>
New York Ohio Rhode Island West Virginia
Increase (Decrease) in Net Assets Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations --
Net investment income $ 35,862,171 $ 17,538,829 $ 2,430,974 $ 2,162,188
Net realized gain (loss) on investments 4,055,362 2,125,592 (126,962) (127,774)
Net change in unrealized appreciation of
investments 2,603,892 281,886 709,572 798,750
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 42,521,425 $ 19,946,307 $ 3,013,584 $ 2,833,164
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 36,583,799 $ 11,748,362 $ 5,557,065 $ 3,463,423
Withdrawals (127,312,013) (58,040,501) (9,309,437) (7,630,857)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets from capital transactions $ (90,728,214) $ (46,292,139) $ (3,752,372) $ (4,167,434)
- ------------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets $ (48,206,789) $ (26,345,832) $ (738,788) $ (1,334,270)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of year $ 652,736,309 $ 319,016,648 $ 42,905,967 $ 40,835,061
- ------------------------------------------------------------------------------------------------------------------------------------
At end of year $ 604,529,520 $ 292,670,816 $ 42,167,179 $ 39,500,791
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
70
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
California Portfolio
------------------------------------------------------------
Year Ended
------------------------------------------------------------
September 30, March 31,
------------------------------------------------------------
1997 1996 1995 1994*** 1994**
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets
- -------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.57% 0.57% 0.59% 0.57%+ 0.55%+
Net expenses, after
custodian fee reduction 0.56% 0.56% 0.58% -- --
Net investment income 5.76% 5.93% 6.22% 6.09%+ 5.72%+
Portfolio Turnover 12% 14% 58% 40% 91%
- -------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $327,004 $370,590 $410,763 $445,131 $467,259
- -------------------------------------------------------------------------------------------
<CAPTION>
Florida Portfolio
------------------------------------------------------------
Year Ended
------------------------------------------------------------
September 30,
------------------------------------------------------------
1997 1996 1995 1994 1993*
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets
- ---------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.52% 0.52% 0.55% 0.48% 0.47%+
Net expenses, after
custodian fee reduction 0.48% 0.49% 0.52% -- --
Net investment income 5.53% 5.67% 5.94% 5.65% 5.53%+
Portfolio Turnover 54% 51% 61% 57% 55%
- ---------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $514,201 $624,374 $712,203 $772,123 $772,422
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, February 1, 1993, to September
30, 1993.
** For the period from the start of business, May 3, 1993, to March 31, 1994.
*** For the six months ended September 30, 1994. The Portfolio changed its
fiscal year from March 31 to September 30, effective September 30, 1994.
/(1)/ The expense ratios for the years ended September 30, 1995 and thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratio
by the effect of any expense offset arrangements with its service
providers. The expense ratios for the prior periods have not been adjusted
to reflect this change.
See notes to financial statements
71
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Massachusetts Portfolio
------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993*
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets++
- ----------------------------------------------------------------------------------------------------------
Net expenses/(1)/ 0.53% 0.55% 0.56% 0.51% 0.49%+
Net expenses, after
custodian fee reduction 0.52% 0.54% 0.53% -- --
Net investment income 5.75% 5.77% 6.00% 5.74% 5.72%+
Portfolio Turnover 35% 51% 87% 53% 38%
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $253,675 $281,129 $302,170 $308,540 $290,613
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Mississippi Portfolio
-------------------------------------------------------
Year Ended September 30,
- ------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993**
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets++
- ------------------------------------------------------------------------------------------------------
Net expenses/(1)/ 0.38% 0.29% 0.27% 0.05% 0.00%+
Net expenses, after
custodian fee reduction 0.37% 0.26% 0.23% -- --
Net investment income 5.59% 5.77% 5.97% 5.67% 4.49%+
Portfolio Turnover 6% 12% 52% 38% 11%
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $22,127 $25,280 $28,993 $29,477 $11,233
- ------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Mississippi Portfolio 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 would have
been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Expenses/(1)/ 0.40% 0.39% 0.32% 0.25%+
Expenses, after custodian fee reduction 0.37% 0.35% -- --
Net investment income 5.66% 5.85% 5.40% 4.24%+
- ------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, February 1, 1993, to September
30, 1993.
** For the period from the start of business, June 11, 1993, to September
30, 1993.
/(1)/ The expense ratios for the years ended September 30, 1995 and thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratio
by the effect of any expense offset arrangements with its service
providers. The expense ratios for the prior periods have not been adjusted
to reflect this change.
See notes to financial statements
72
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
New York Portfolio
----------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993**
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets
- ---------------------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.57% 0.52% 0.54% 0.48% 0.48%+
Net expenses, after
custodian fee reduction 0.57% 0.49% 0.51% -- --
Net investment income 5.60% 5.64% 5.97% 5.70% 5.64%+
Portfolio Turnover 44% 47% 55% 47% 37%
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $527,604 $604,530 $652,736 $655,647 $648,807
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Ohio Portfolio
----------------------------------------------------------
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets
- ---------------------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.56% 0.57% 0.57% 0.51% 0.49%+
Net expenses, after
custodian fee reduction 0.55% 0.56% 0.55% -- --
Net investment income 5.70% 5.69% 5.80% 5.61% 5.61%+
Portfolio Turnover 30% 35% 51% 31% 24%
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $271,269 $292,671 $319,017 $324,412 $298,092
- ---------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, February 1, 1993, to September
30, 1993.
** For the period from the start of business, June 11, 1993, to September 30,
1993.
/(1)/ The expense ratios for the years ended September 30, 1995 and thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolios to increase their expense
ratios by the effect of any expense offset arrangements with their service
providers. The expense ratios for the prior periods have not been adjusted
to reflect this change.
See notes to financial statements
73
<PAGE>
EV Municipals Portfolios as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Rhode Island Portfolio
------------------------------------------------------
Year Ended September 30,
------------------------------------------------------
1997 1996 1995 1994 1993*
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets++
- --------------------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.27% 0.27% 0.29% 0.12% 0.00%+
Net expenses, after
custodian fee reduction 0.23% 0.24% 0.25% -- --
Net investment income 5.54% 5.69% 5.96% 5.64% 4.86%+
Portfolio Turnover 39% 25% 42% 42% 23%
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $40,218 $42,167 $42,906 $38,120 $16,981
- --------------------------------------------------------------------------------------------------------
</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 would have been as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.39% 0.40% 0.41% 0.33% 0.26%+
Expenses after custodian fee reduction 0.35% 0.37% 0.37% -- --
Net investment income 5.42% 5.56% 5.84% 5.43% 4.60%+
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
West Virginia Portfolio
------------------------------------------------------
Year Ended September 30,
------------------------------------------------------
1997 1996 1995 1994 1993**
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average
daily net assets++
- --------------------------------------------------------------------------------------------------------
Net expenses /(1)/ 0.38% 0.42% 0.31% 0.10% 0.00%+
Net expenses, after
custodian fee reduction 0.36% 0.38% 0.29% -- --
Net investment income 5.44% 5.41% 5.81% 5.52% 4.50%+
Portfolio Turnover 24% 43% 19% 39% 19%
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $33,503 $39,501 $40,835 $40,473 $24,760
- --------------------------------------------------------------------------------------------------------
</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 would have been as
follows:
<TABLE>
<S> <C> <C> <C>
Expenses /(1)/ 0.39% 0.33% 0.21%+
Expenses after custodian fee reduction 0.37% -- --
Net investment income 5.73% 5.29% 4.30%+
- --------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, June 11, 1993, to September 30,
1993.
** For the period from the start of business, February 1, 1993, to September
30, 1993.
/(1)/ The expense ratios for the years ended September 30, 1995 and thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolios to increase their expense
ratios by the effect of any expense offset arrangements with their service
providers. The expense ratios for the prior periods have not been adjusted
to reflect this change.
See notes to financial statements
74
<PAGE>
EV Municipals Portfolios as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
----------------------------------------------------------------------------
California Municipals Portfolio (California Portfolio), Florida Municipals
Portfolio (Florida Portfolio), Massachusetts Municipals Portfolio
(Massachusetts Portfolio), Mississippi Municipals Portfolio (Mississippi
Portfolio), New York Municipals Portfolio (New York Portfolio), Ohio
Municipals Portfolio (Ohio Portfolio), Rhode Island Municipals Portfolio
(Rhode Island Portfolio) and West Virginia Municipals Portfolio (West
Virginia Portfolio), collectively the Portfolios, are registered under the
Investment Company Act of 1940, as amended, as non-diversified, open-end
management investment companies. The Portfolios 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 consistently
followed by the Portfolios in the preparation of their financial statements.
The policies are in conformity with generally accepted accounting
principles.
A Investment Valuations -- Municipal bonds are normally valued on the basis
of valuations furnished by a pricing service. Taxable obligations, if any,
for which price quotations are readily available are normally valued at the
mean between the latest bid and asked prices. Futures contracts and options
on futures contracts listed on commodity exchanges are valued at closing
settlement prices. Over-the-counter options on futures contracts are
normally valued at the mean between the latest bid and asked prices. Short-
term obligations, maturing in sixty days or less, are valued at amortized
cost, which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for Federal
income tax purposes.
C Income Taxes -- The Portfolios are treated as partnerships for Federal tax
purposes. No provision is made by the Portfolios for Federal or state taxes
on any taxable income of the Portfolios because each investor in the
Portfolios is ultimately responsible for the payment of any taxes. Since
some of the Portfolios' investors are regulated investment companies that
invest all or substantially all of their assets in the Portfolios, the
Portfolios normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in order for
their respective investors to satisfy them. The Portfolios will allocate at
least annually among their respective investors each investor's distributive
share of the Portfolios' net taxable (if any) and tax-exempt investment
income, net realized capital gains, and any other items of income, gain,
loss, deduction or credit. Interest income received by the Portfolios on
investments in municipal bonds, which is excludable from gross income under
the Internal Revenue Code, will retain its status as income exempt from
federal income tax when allocated to each Portfolio's investors. The portion
of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item for investors.
D Deferred Organization Expenses -- Costs incurred by a Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Financial Futures Contracts -- Upon the entering of a financial futures
contract, a Portfolio is required to deposit ("initial margin") either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by a Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by a Portfolio. A
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, a Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
F Options on Financial Futures Contracts -- Upon the purchase of a put
option on a financial futures contract by a Portfolio, the premium paid is
recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, a Portfolio will realize a loss in the
amount of the cost of the option. When a Portfolio enters into a closing
sales transaction, the Portfolio will realize a gain or loss depending on
whether the sales proceeds from the closing sale transaction are greater or
less than the cost of the option. When a Portfolio exercises a put option,
settlement is made in cash. The risk associated with purchasing put options
is limited to the premium originally paid.
G When-issued and Delayed Delivery Transactions -- The Portfolios may engage
in when-issued or delayed delivery transactions. The Portfolios 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
75
<PAGE>
EV Municipals Portfolios as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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 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.
J Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolios. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balance each Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolios' custodian fees
are reflected as a reduction of operating expenses in the statements of
operations.
2 Investment Adviser Fee and Other Transactions with Affiliates
----------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
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 September 30, 1997, each
Portfolio paid advisory fees as follows:
<TABLE>
<CAPTION>
Portfolio Amount Effective Rate*
----------------------------------------------------------------------------
<S> <C> <C>
California $1,687,887 0.49%
Florida 2,593,352 0.46%
Massachusetts 1,203,548 0.45%
Mississippi 44,507 0.19%
New York 2,603,611 0.46%
Ohio 1,272,425 0.45%
Rhode Island 96,316 0.12%
West Virginia 86,026 0.23%
</TABLE>
* Advisory fees paid as a percentage of average daily net assets.
To enhance the net income of the Rhode Island Portfolio, BMR made a
reduction of its fee in the amount of $47,940. 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.
Certain of the officers and Trustees of the Portfolios are officers and
directors/trustees of the above organizations. 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
September 30, 1997, no significant amounts have been deferred.
76
<PAGE>
EV Municipals Portfolios as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
3 Investments
----------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities,
purchased option transactions and short-term obligations, for the year ended
September 30, 1997 were as follows:
<TABLE>
<CAPTION>
California Portfolio
----------------------------------------------------------------------------
<S> <C>
Purchases $ 42,098,487
Sales 101,434,811
Florida Portfolio
----------------------------------------------------------------------------
Purchases $ 292,725,029
Sales 409,405,531
Massachusetts Portfolio
----------------------------------------------------------------------------
Purchases $ 91,051,927
Sales 118,236,663
Mississippi Portfolio
----------------------------------------------------------------------------
Purchases $ 1,398,895
Sales 5,900,535
New York Portfolio
----------------------------------------------------------------------------
Purchases $ 247,761,203
Sales 339,715,460
Ohio Portfolio
----------------------------------------------------------------------------
Purchases $ 82,801,321
Sales 108,948,062
Rhode Island Portfolio
----------------------------------------------------------------------------
Purchases $ 15,377,491
Sales 17,904,376
West Virginia Portfolio
----------------------------------------------------------------------------
Purchases $ 8,624,072
Sales 15,389,791
</TABLE>
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned by each Portfolio at September 30, 1997, as computed on a
federal income tax basis, are as follows:
<TABLE>
<CAPTION>
California Portfolio
----------------------------------------------------------------------------
<S> <C>
Aggregate Cost $ 288,296,835
----------------------------------------------------------------------------
Gross unrealized appreciation $ 37,425,099
Gross unrealized depreciation (189,360)
----------------------------------------------------------------------------
Net unrealized appreciation $ 37,235,739
----------------------------------------------------------------------------
Florida Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 462,068,417
----------------------------------------------------------------------------
Gross unrealized appreciation $ 31,954,789
Gross unrealized depreciation --
----------------------------------------------------------------------------
Net unrealized appreciation $ 31,954,789
----------------------------------------------------------------------------
Massachusetts Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 238,584,146
----------------------------------------------------------------------------
Gross unrealized appreciation $ 23,368,596
Gross unrealized depreciation (77,042)
----------------------------------------------------------------------------
Net unrealized appreciation $ 23,291,554
----------------------------------------------------------------------------
Mississippi Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 19,751,773
----------------------------------------------------------------------------
Gross unrealized appreciation $ 2,027,684
Gross unrealized depreciation --
----------------------------------------------------------------------------
Net unrealized appreciation $ 2,027,684
----------------------------------------------------------------------------
New York Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 481,331,084
----------------------------------------------------------------------------
Gross unrealized appreciation $ 43,779,548
Gross unrealized depreciation (262,215)
----------------------------------------------------------------------------
Net unrealized appreciation $ 43,517,333
----------------------------------------------------------------------------
</TABLE>
77
<PAGE>
EV Municipals Portfolios as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
<TABLE>
<CAPTION>
Ohio Portfolio
----------------------------------------------------------------------------
<S> <C>
Aggregate Cost $ 252,173,553
----------------------------------------------------------------------------
Gross unrealized appreciation $ 16,933,967
Gross unrealized depreciation --
----------------------------------------------------------------------------
Net unrealized appreciation $ 16,933,967
----------------------------------------------------------------------------
Rhode Island Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 38,164,900
----------------------------------------------------------------------------
Gross unrealized appreciation $ 2,093,874
Gross unrealized depreciation (9,623)
----------------------------------------------------------------------------
Net unrealized appreciation $ 2,084,251
----------------------------------------------------------------------------
West Virginia Portfolio
----------------------------------------------------------------------------
Aggregate Cost $ 31,140,556
----------------------------------------------------------------------------
Gross unrealized appreciation $ 1,980,371
Gross unrealized depreciation --
----------------------------------------------------------------------------
Net unrealized appreciation $ 1,980,371
----------------------------------------------------------------------------
</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. The portfolios may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at the bank's adjusted certificate of deposit rate, Eurodollar
rate or federal funds rate. In addition, a fee computed at an annual rate of
0.15% on the daily unused portion of the line of credit is allocated among
the participating portfolios and funds at the end of each quarter. At
September 30, 1997, the California Portfolio, Mississippi Portfolio, New
York Portfolio, Ohio Portfolio, Rhode Island Portfolio, and West Virginia
Portfolio had a balance outstanding pursuant to this line of credit of
$1,529,000, $64,000, $5,940,000, $2,157,000, $749,000 and $1,127,000
respectively. The Portfolios did not have any significant borrowings or
allocated fees during the year ended September 30, 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 September 30,
1997, is as follows:
<TABLE>
<CAPTION>
Futures
Contracts
Expiration Net Unrealized
Portfolio Date Contracts Position Depreciation
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California 12/97 127 US Treasury Bonds Short $(389,652)
---------------------------------------------------------------------------------------
Massachusetts 12/97 76 US Treasury Bonds Short (233,177)
---------------------------------------------------------------------------------------
Mississippi 12/97 9 US Treasury Bonds Short (27,613)
---------------------------------------------------------------------------------------
New York 12/97 320 US Treasury Bonds Short (981,800)
---------------------------------------------------------------------------------------
Rhode Island 12/97 29 US Treasury Bonds Short (88,975)
---------------------------------------------------------------------------------------
West Virginia 12/97 15 US Treasury Bonds Short (34,305)
---------------------------------------------------------------------------------------
</TABLE>
At September 30, 1997 each Portfolio had sufficient cash and/or securities
to cover margin requirements on open futures contracts.
78
<PAGE>
EV Municipals Portfolios as of September 30, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors
of the California Municipals Portfolio, Florida Municipals Portfolio,
Massachusetts Municipals Portfolio, Mississippi Municipals Portfolio, New York
Municipals Portfolio, Ohio Municipals Portfolio, Rhode Island Municipals
Portfolio, and West Virginia Municipals Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of the California Municipals Portfolio, Florida
Municipals Portfolio, Massachusetts Municipals Portfolio, Mississippi Municipals
Portfolio, New York Municipals Portfolio, Ohio Municipals Portfolio, Rhode
Island Municipals Portfolio, and West Virginia Municipals Portfolio as of
September 30, 1997, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended September 30,
1997 and 1996 and the supplementary data for each of the years in the five-year
period ended September 30, 1997. (For the California Municipals Portfolio, the
supplementary data is for each of the years in the four-year period ended
September 30, 1997 and the period from the start of business, May 3, 1993, to
March 31, 1994). These financial statements and supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
September 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial positions of the California Municipals
Portfolio, Florida Municipals Portfolio, Massachusetts Municipals Portfolio,
Mississippi Municipals Portfolio, New York Municipals Portfolio, Ohio Municipals
Portfolio, Rhode Island Municipals Portfolio, and West Virginia Municipals
Portfolio at September 30, 1997, the results of their operations, the changes in
their net assets and their supplementary data for the respective stated period,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 7, 1997
79
<PAGE>
EV Marathon Municipals Funds as of September 30, 1997
INVESTMENT MANAGEMENT
EV Marathon Municipals Funds
<TABLE>
<S> <C>
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
James B. Hawkes
Vice President and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Robert B. MacIntosh Banking, Harvard University Graduate School of
Vice President Business Administration
James L. O'Connor Norton H. Reamer
Treasurer President and Director, United Asset
Management Corporation
Alan R. Dynner
Secretary John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Municipals Portfolios
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President and Portfolio President, Dwight Partners, Inc.
Manager of Florida and Ohio Chairman, Newspapers of New England, Inc.
Municipals Portfolios
Samuel L. Hayes, III
James B. Hawkes Jacob H. Schiff Professor of Investment
Vice President and Trustee Banking, Harvard University Graduate School of
Business Administration
Robert B. MacIntosh
Vice President and Portfolio Norton H. Reamer
Manager of Massachusetts President and Director, United Asset
Municipals Portfolio Management Corporation
Nicole Anderes John L. Thorndike
Vice President and Portfolio Formerly Director, Fiduciary Company Incorporated
Manager of New York
and Rhode Island Jack L. Treynor
Municipals Portfolios Investment Adviser and Consultant
Timothy T. Browse
Vice President and Portfolio
Manager of West Virginia
Municipals Portfolio
Cynthia J. Clemson
Vice President and Portfolio
Manager of California and
Mississippi Municipals Portfolio
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
</TABLE>
80
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
Portfolio Investment Adviser
Boston Management and Research
24 Federal Street
Boston, MA 02110
Fund Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
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-8CSRC-12/97
